Green Mountain Care Health Care Reform Financing Plan Violates Act 48

SPECIAL REPORT – Vermonters for Health Care Freedom

Last Thursday Governor Shumlin presented his budget address to the Legislature, and invested only two out of thirty minutes in the subject of health care. At about 5:00 PM the long awaited and overdue financing plan report was released – just late enough to ensure no one would be able to digest its 133 pages overnight. On Friday morning administration officials presented the report to a joint meeting of the House Ways and Means and Health Care committees, and we were there.

Vermont media outlets sought out VHCF for comment and Jeff Wennberg, executive director, pointed out that the report did not comply with the requirements of Act 48 and that the claim of health care system savings was not credible. Since then VHCF’s team has studied the report and the following is a summary of the critical facts every Vermonter should know. If you want to see the entire report for yourself, it is available at: 20corrected_012913.pdf

The report contains two financing plans; one for the Health Benefits Exchange beginning in 2014 and ending three years later, and the second for Green Mountain Care single payer which is scheduled to begin on January 1, 2017. This Special Report deals only with the contents of the second plan. Information about the 2014 plan will be provided later. Key report findings, including both plans, are summarized in a PowerPoint presentation available here:

Green Mountain Care financing report – 2017 single payer

> First and foremost the plan fails to meet the legal requirements of Act 48, the single payer law. Back on July 15, 2012 the Rutland Herald reported:

“The establishment of a new health care financing system could have far-reaching impacts on the whole of Vermont’s tax code, and the contract stipulates that the financing plan shall include an “analysis of the interaction of new provisions with Vermont’s current revenue structure, including income, property and sales tax, and recommend possible complementary reforms to the overall tax code.””

But no such analysis was done. Indeed the financing plan contained absolutely no recommendations or analysis of how single payer will be financed. VHCF found 15 specific requirements of Act 48 that the report fails to address. Here is a link to a table listing the specific legal requirements and how the report failed to comply:

> The report stated that “[Green Mountain Care] is estimated to cost approximately $3.5 billion, but only $1.61 billion would need to be financed due to federal contributions.” ONLY $1.6 billion? For context take a look at the graphic below comparing the $1.6 billion in new taxes GMC will require to the state’s largest current tax revenues:

GMC Taxes v major VT taxes small


Green Mountain Care will require more in new taxes than the personal income tax, the sales tax, the rooms and meals tax and the gas tax COMBINED. That is more than two and one half times the total revenues from the income tax.

> The report claims GMC will save money, but how much? The chart below shows the total cost of health care in Vermont after GMC, and the expected savings – about one half of one percent.

GMC Savings chart small


But even these savings are suspect. The report did not take into consideration whether out of starters with expensive health needs will move here for ‘free’ care; it assumed vast increases in federal funding with dubious assumptions, including no consideration of whether the Congress will reduce funding over the next three years. The wildest assumptions center on the expectation that the state will be able to administer GMC for 80 percent of the current cost to administer Medicaid (as a percentage of claims), and providers will be able to process their claims at half the cost they currently experience. If any of these assumptions proves untrue the claimed savings will evaporate.

> The analysis in the report makes no provision for a ‘loss reserve’ which all private health insurers are required to maintain. If the state is held to the same standard as private insurers this would add $175 million to the first year cost. And if the state does not provide for this reserve Vermont’s favorable bond rating could be affected.

> Three different treatments of Medicare are modeled. All three leave Medicare itself untouched, but they would change the way supplemental insurance plans are offered. The first idea would simply offer an additional supplemental plan through Green Mountain Care which beneficiaries could purchase just the same as they do commercial supplemental insurance. The second and third would provide coverage through Green Mountain Care with varying ‘opt out’ provisions. One option would require the beneficiary to continue to pay Part B premiums but not the Part D, and the other would not require either. The cost to taxpayers of the latter two plans are $83 and $246 million respectively, and none of these costs are included in the $1.6 billion estimated tax increase described above.

> The fee assessed on small businesses to support Catamount Health is assumed to continue even though Catamount Health will cease to exist as of January 1, 2014.

> Provider payments for GMC, including Medicaid beneficiaries, will be set at 105% of Medicare. Currently Medicaid pays 82% of Medicare and commercial insurance pays 155%. The blended average reimbursement is currently 129% of Medicare, so GMC will reduce average provider reimbursements from 129% of Medicare to $105%. The report clearly states that if federal Medicare reimbursements change, GMC reimbursements will automatically adjust to remain at 105% of the then current federal rates.

> Act 48 calls for an extensive stakeholder engagement on taxes to take place BEFORE February 15, 2012. This did not happen, and the required tax recommendation and analysis has also not been produced. In its place, the administration now proposes to announce – one year after the stakeholder outreach was to be completed – a plan for stakeholder engagement on tax resources.

Andrew Stein writing for wrote an excellent article about the roll out of this report, available here:

The information that is missing from this report is critical to an informed debate within the General Assembly on required new taxes, the magnitude of which dwarfs all prior revenue discussions in the history of Vermont. Rather than providing this information ‘no later than January 15th’ as required by law, the administration intends to wait until February 15th, at which time they will propose a process to begin a discussion about how we might plan to answer the questions. Meanwhile the clock ticks and implementation proceeds apace.

VHCF will continue to spread the word and work with responsible members of the legislature to make the Shumlin Administration comply with the law and finally produce the information necessary for an informed debate about the cost and consequences of their single payer health care reform.