Health Care Reform Newsletter #28

by Vermonters for Health Care Freedom

Vermonters for Health Care Freedom continues our newsletter series on Vermont’s health care reform efforts. Our aim is to provide useful information to our client businesses and newsletter recipients, to inform our readers about the efforts toward a “single payer” health care system in Vermont and the problems inherent in such a system, and to address other related health care matters at both the federal and state levels.

Quote of the Week: “The more we can work together without, you know, looking like we’re one branch of government, we’d be more than happy to do that”.

Shumlin Administration Secretary Jeb Spaulding to the House Health Care legislative committee

In this issue:

  • Seven More Privacy Breaches for Vermont Health Connect
  • When Will Vermont Health Connect Really Work?
  • Paying For “Single Payer”: Legislative Leaders Weigh In
  • Hold Onto Your Wallet
  • Can ERISA Save the Day?
  • Bill to Delay “Single Payer” Until 2019 Immediately Quashed by House Health Care
  • Shumlin Proposes to Double Health Care Claims Tax

Breaking News:

Seven More Privacy Breaches for Vermont Health Connect

The Shumlin administration is finally being up-front about the privacy breaches occurring within Vermont Health Connect. Last fall DHVA Commissioner Mark Larson failed to report the first privacy breach when asked about it by a member of the House Health Care Committee. Since then, he has had to be more forthcoming.

The next incident occurred in early December 2013, and seven more have occurred between December 16, 2013 and January 24, 2014. There were four instances in which customers logged into their accounts and found scanned checks from other people with similar names. In another case, an individual received two invoices, one for another customer. A Health Connect worker entered information into a person’s account from a paper application not realizing it was a different person with a similar name. Whatever happened to Social Security verification, you might ask? Whatever happened to checks and balances, no pun intended….

It is clear to us that any expectation of personal privacy will be lost if Vermont attempts a “single payer” health care system. The truth is that the state cannot even manage a system where they have received incredible amounts of assistance, information, training, personnel and resources. It boggles the mind to think what will happen if the state tries to create and run a system big enough to cover the majority of Vermonters. They are simply incapable of doing it.

Update: As of Monday, 2/17, three more incidents have been reported, a total of 12 to date.

When Will Vermont Health Connect Really Work?

After months of delays, missed deadlines and broken promises, the Governor still cannot tell Vermont small businesses when the website will be fully functional. The online payment system is still not working for small businesses. However, this week Don George, President of Blue Cross Blue Shield of Vermont told legislators that the system should be able to accommodate small businesses by August 2014. August 2014?

Mr. George went on to say that Blue Cross had issued apologies to the business community for the poor performance of the Exchange. Of course the apologies ought to be coming from the Wizard of Oz himself, but don’t hold your breath on that. The Governor never seems to be able to get past, “No one is more disappointed that I am”. Really? Has he taken a poll?

Hold Onto Your Wallet

After the administration’s UMass study pegged the cost of “single payer” at $1.6b, and the business community’s Avalere study came in closer to $2.2b, the Joint Fiscal Office and the Shumlin Administration have come up with a third “consensus” cost. The new estimate is between $1.8b and $2.2b, higher than the UMASS study. The consensus estimate includes the following costs that were not included in the UMASS study:

  • Additional Startup Costs:                                                                       $50m to $150m
  • Makeup for Lower Federal Assistance:                                             $21m to $36m
  • Ongoing Technology, Staffing and Consulting Needs:               $33m to $45m
  • Potential Elimination of Provider Tax Revenues:                       $0 to $157m
  • Potential Elimination of Claims Tax and Employer Tax:          $51m
  • Health Plan Reserve Fund:                                                                    $0 – $125m

As mind-boggling as these numbers are, it gets worse. The consensus numbers assume that providers will be paid only 105% of Medicare rates. Providers will not stay in Vermont for those meager rates, so either there will be no docs left or the cost of “single payer” will be much higher.

Joint Fiscal Officer Steve Klein told the House Health Care Committee that the current cost estimates of $1.8b – $2.2b can change significantly based on decisions that have yet to be made. The benefit plan design, what portion of medical costs will be covered, reimbursement rates for providers, and changes in Federal subsidies are all big ticket cost items.

As VHCF has been saying for months, if the state is pinched for cash, or if Federal subsidies decrease (they already have – see second bullet above), Vermonters will not get all the health care they need under “single payer”. It won’t be possible. This is where health care rationing begins.

Klein also warned that the cost estimates would change based on policy decisions. “As you change policy levers the range will change dramatically”, said Klein.

Paying For “Single Payer” – Legislative Leaders Weigh In

At an annual Chamber of Commerce luncheon on February 4, 2014, legislative leaders were asked by business leaders about paying for “single payer”. Since cost estimates of $1.8 – $2.2 billion have emerged, the tone has changed a bit. House Speaker Shap Smith is now saying, “I do not think a single payer system that is financed solely by a payroll is one that could work”. Senate President John Campbell went so far as to say, “But if it costs far more than what we anticipated, I think we need to be ready to go in a different direction”. Finally, a glimmer of perspicacity – but just a glimmer.

Can ERISA Save the Day?

The Employee Retirement Income Security Act (“ERISA”) law made headlines in Vermont recently. Many Vermonters are hopeful that a new federal appeals court ruling regarding ERISA could help derail the ill-conceived “single payer” plan in Vermont.

ERISA is a federal law that regulates private employer health plans and protects self-insured plans from state health benefit regulations. These plans include IBM, GE and other large self-insured Vermont employer health plans. The ERISA law supersedes state laws, and does not allow the state to regulate self-insured health plans where the employer takes the financial risk.

Recently, the Second Circuit Court of Appeals upheld a suit by Liberty Mutual Insurance Company (LMIC), which sued the State of Vermont over Vermont’s requirement that the company report its claims information to the state. LMIC said that it already reports this data to the Feds under the ERISA law and it should be protected by ERISA from having to provide it to the state as well. The court agreed. The Shumlin administration responded that it did not believe that the ERISA law would prevent the state from imposing single payer on ERISA plans in Vermont.

However, before reaching that conclusion, a closer look at the results of court challenges to the ERISA law is in order. Although Circuit Courts of Appeal have been mixed in their rulings on ERISA challenges, the Supreme Court has ruled that:

  • State law relates to an employee benefit if it has a connection to or a reference to such a plan. The Court said that Congress intended the preemption from state law to be applied broadly. (Shaw v. Delta Air Lines, Inc. 463 U.S.85 (1983))
  • State laws that are specifically designed to affect state employee benefit plans are preempted (from state law) by ERISA. (Mackey v. Lanier Collection Agency and Service, Inc. 486 U.S. 825 (1988))
  • State law can relate to a benefit plan and be preempted by ERISA even if the law is not specifically designed to affect those plans, or the effect is only indirect. (Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990))

How this will all play out with Vermont’s “single payer” effort is yet to be determined. However, legislators are concerned about ERISA, and the negative impact on “single payer” if large Vermont employers were preempted by ERISA from participating – or from paying high “single payer” taxes to the state. Without those funds, “single payer” would not be financially possible.

Bill To Delay “Single Payer” Until 2019 Killed On Arrival

A bipartisan bill designed to slow Governor Shumlin’s headlong rush to “single payer” was quashed immediately in the House Health Care Committee (HHC). HHC is dominated by “single payer” advocates, except for Republicans Doug Gage and Mary Morrissey, who do yeomen’s’ work in that committee to protect Vermonters’ health care freedom, but are generally overruled.

Given enough time, Vermonters would find out that this grand scheme is totally unworkable and unaffordable. But the Governor and his minions have no intention of letting that happen.

The bill would have delayed “single payer” implementation until 2019, in order to prove that it won’t hurt the state economy, will actually reduce health care costs, has sustainable funding over the long haul, and will reimburse Vermont providers enough to stay in the state.

Shumlin’s point person, Robin Lunge, assured the committee that, although none of these required proofs has yet been determined, single payer will absolutely work without a hitch on January 1, 2017. Of course, this is the same Robin Lunge who also assured us that Vermont Health Connect would go off without a hitch on October 1, 2013.

Shumlin Proposes to Double Health Care Claims Tax

The Shumlin administration has proposed doubling the claims tax that insurers have to pay the state on each claim they process. Blue Cross and Blue Shield and MVP testified last week before House Ways and Means Committee that doubling the tax would cost $9m – $10m. This cost would be passed along to 265,000 insured Vermonters in higher premiums.

The funds would be used to plug a $14m hole in the state’s health care fund that pays for Medicaid. Didn’t the Governor just take $10m out of Medicaid funds that would have paid for inpatient detox, to pay for his “opiate addiction” initiative? Beyond that move being counterintuitive, it appears that the Governor wants Vermonters to pay higher health care premiums to fund his “opiate addiction” initiative.

Begging the question, is this the same Governor who is trying to keep our health care costs down? Or is that only unless he needs the money? Why did his point person Robin Lunge testify to the House Health Care committee that this is “not really a cost shift to Vermonters”?

It is if you have health care claim.

And by the way, any tax that impacts more than 1 in 3 Vermonters is a broad-based tax, which the Governor has sworn he would not impose.