Health reform ‘wind shift’ deserves an explanation

by Tom Pelham

On Jan. 19, 2011, with Harvard professor William Hsiao’s report in hand, Gov. Peter Shumlin confidently proclaimed, “It’s clear that moving to a single payer plan, with or without a limited role for private insurers, will save Vermont significant money in health care. Hsiao estimates that a single payer plan with a limited role for a private insurer would save $500 million in the first year of operation …”

Further the governor declared “there will be no additional overall cost under these plans for employers.”

With the Hsiao report pointing the way and the governor’s ardent support, the Legislature passed H. 202, “An Act Related to a Universal and Unified Health System.” The governor signed H.202 on May 26, 2011, creating Green Mountain Care, “a publicly financed health care program designed to contain costs and to provide comprehensive, affordable, high-quality health care.” With the law in their pockets, supporters of Green Mountain Care set about implementing the governor’s plan.  But now, in the Feb. 19 Times Argus BISCHA Commissioner Stephen Kimbell reports, “We don’t think we can lower the $5 billion cost (of health care), we just want to slow the rate of growth.” “Just increasing at a more modest rate would be good” he said. Further, an actuarial analysis recently released by the Shumlin administration revealed that on the way to Green Mountain Care, some businesses in the health insurance exchange, starting in 2014, would see an increase in health insurance premiums of 18.4 percent.

So, what’s happening here? Commissioner Kimbell’s statement is far removed from the governor’s declaration a year earlier of $500 million in savings. Why the big change? This is a major “wind shift” on the way to single payer that begs for more detailed explanation.

Is it, as some believe, that Hsiao’s report was based upon rosy expectations but with the sole purpose to catapult Vermont down the road to single payer? Or might it be just the ideological zeal of health care reform advocates running into underlying economic and constitutional realities.

Whatever the cause, it is of deep concern that proponents of massive changes to our health care system now acknowledge that the half billion dollar savings in Vermont’s health care costs is not on the horizon and that many small businesses will be harmed in the meantime. And, if these cornerstone savings are not achievable, should the whole construct of H.202 be questioned and revisited?  This changing profile of health care reform should concern state Treasurer Beth Pearce.  She might ask the Legislature and governor to revisit the reform effort now unfolding and consider its effect upon Vermont’s treasured bond rating. Treasurer Pearce recently opposed the purchase of a 51 percent stake in VELCO, which owns Vermont’s electrical transmissions lines, because it would cost, coincidentally, $500 million and hurt Vermont’s AAA bond rating. Mistakes of such scale in the health care reform effort can as well devastate Vermont’s favorable fiscal footing crafted and protected by Govs. Snelling, Dean and Douglas.

The treasurer might convene a “watch dog” group tasked to protect Vermont’s bond rating as we proceed with health care reform. If agreeable, David Coates, a well respected overseer of fiscal prudence, might organize this group. Coates’ hard work over the years on government efficiency and retirement funding reform will be for naught if poor fiscal judgment prevails regarding health care reform.

Vermont can have health care reform that doesn’t jeopardize our fiscal well-being. A robust government regulated health care “exchange” in the mold envisioned by President Barack Obama is a good idea. Ending health care costs shifts that drive up insurance rates is a good idea. Restructuring health care benefits under Medicaid such that beneficiaries are more empowered to manage their health care and improve health status is a good idea. Global budgeting for regional health care oligarchies like Fletcher Allen is also a good idea.

However, all this has to be done cautiously and without jeopardizing the financial foundations of state government. Given its large scale, the financial fall-out of poorly crafted health care reform will squeeze taxpayers and deprive scarce resources from other valued state programs far removed from health care reform.

Tom Pelham of Berlin was finance commissioner for Gov. Howard Dean, tax commissioner for Gov. Jim Douglas and a state representative serving on the Appropriations Committee.