Newsletter – July 27, 2012

by Vermonters for Health Care Freedom

VHCF Fact Check: Medical Inflation to Double VT Costs by 2020?

One ‘fact’ that the Governor Shumlin often repeats is designed to strike terror in the hearts of those who pay for health care services: “If we don’t do something to contain costs, at current rates the $5 billion we are spending on health care today will be $10 billion by 2020.” But will it?

State Treasurer Candidate Wendy Wilton was upbraided by single payer advocate Hamilton Davis for using a medical cost inflation rate of 7.5% in her single payer financial model, rather than the more current assumed rate of 3.5%. Turns out the 7.5% was provided by Commissioner Kimbell’s Department of Financial Regulation. It also appears to be the assumption supporting the claim that health care costs will double through 2020.

If we use the more recent assumption to calculate expected growth in health care costs we get a very different result. Instead of a total cost of $10 billion in 2020, the cost to Vermont would be $6.6 billion. But that, too, is misleading because there is an inflation rate underlying the whole economy. In other words, if health care costs grow at the same rate as general inflation, then technically they have not grown at all – the money we are paying them with has ‘shrunk.’ If we take the average general inflation as measured by the CPI over the last 10 years and assume that the same trend will continue through 2020 we get an ‘inflation adjusted’ total health services estimate of $5.4 billion in 2020, assuming constant 2012 dollars.

Newsletter anticipates the administration will argue that the 3.5% assumption is only valid if single payer is implemented. This is highly debatable given the expansion of coverage and incentives for overuse buried in Green Mountain Care, as well as the experience of Canada which has been struggling with uncontrolled single payer cost increases for decades (see “Canadian Single Payer Health Care Spending ‘Unsustainable’” below). But overall medical inflation in Vermont and nationally have been trending down in recent years, and this has happened without the replacing the private insurance market with a government monopoly (for further evidence see “Hospital Budgets Stay within GMCB Revenue Cap” below). Even if we use the most recent measured Vermont cost increase (4.8% between 2009 and 2010) and apply constant 2012 dollars, the total cost in 2020 is $6 billion, not $10 billion.

Using more recent medical cost inflation rates and using 2012 dollars, the cost of health services to Vermonters will grow from $5 billion today to something between $5.4 and $6 billion in 2020. This result may deserve a response but it hardly constitutes a crisis justifying a government takeover of the industry.

At the very least, our leaders should be challenged every time they repeat the statement that “absent the replacement of our system with a government monopoly, health care costs will double in the next eight years.” It just isn’t true.

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Kimbell’s Statement at Odds with Governor

Commissioner of Financial Regulation Steve Kimbell appeared on the progressive radio program “Equal Time,” broadcast on WDEV. As has been the pattern, what was left unsaid was more important than what was said, and it would take pages here to fill in the blanks and correct all the inaccuracies. But Kimbell repeated that,

“The single administrative system is by necessity a ways off because the Affordable Care Act does require that we have multiple insurance carriers offering products in the exchange, and we will need to seek waivers from that which are available – we can start applying in 2015 or 2016 and they kick in in 2017 to consolidate the administrative functions and save additional funds there.”

As reported here last week, this is inconsistent with Governor Shumlin’s prediction that he will “outsmart the feds” and implement single payer before 2016, a prediction that is consistent with the instructions his administration has given to their consultant charged with the task of proposing a financing plan for the program. Shumlin made it clear that he plans to implement single payer without the benefit of a federal waiver. Nonetheless, his administration insists that the legislature should NOT address the all-important financing question before 2014.

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Wait Times Worsen in Canada; Prospects for Improvement Dim

The Chronicle Herald of Halifax, Nova Scotia, reports in a commentary dim prospects for improving provincial performance in meeting national benchmarks for medical wait times. The commentary points to declining federal support and the reported worsening of the situation nationally as indicators of eventual failure.

“Patients in this province officially found out last week something that will come as no surprise. Wait times for emergency care are pretty much off the charts, even, at many hospitals, for serious cases.”

Read the Chronicle Herald commentary here: http://thechronicleherald.ca/opinion/117000-stephenson-province-struggling-to-make-health-care-grade

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Hospital Budgets Stay within GMCB Revenue Cap

According to a VT Digger report, total budgeted Vermont hospital revenues are budgeted to increase 7.1% next year, but because of the way the state accounts for different types of revenues (or expenses), the total will meet the 3.75% cap imposed by the Green Mountain Care Board earlier this year. The overall capped revenues are estimated to increase 3.1%, although Copley Hospital, Grace Cottage, Mount Ascutney, Northwestern Medical Center, Porter Medical Center and Rutland Regional Medical Center all individually showed increases greater than 3.75%. Fletcher Allen, which provides about half of the hospital based services in Vermont, proposed a 2.8% increase, bringing the statewide total down.

The VT Digger article is here: http://vtdigger.org/2012/07/26/hospital-budget-requests-come-in-with-7-1-percent-increase/

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Taiwan’s Health Care Workers Take to the Streets in Protest

A report published on CNNiReport has thousands of Taiwanese health care workers marching to protest “sweatshop” national health insurance conditions. Taiwan’s single payer national health insurance program was designed by the same expert who designed Vermont’s Green Mountain Care.

Read the full report here: http://ireport.cnn.com/docs/DOC-784261

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Canadian Single Payer Health Care Spending ‘Unsustainable’

The Daily Caller ran a story on a new Canadian study which projects that Canadian health care spending is ‘unsustainable.’ Vermont has modeled its Green Mountain Care after the Canadian model, and the most often repeated justification for our reform is to control escalating health care costs (see ‘Fact Check’ above). But cost increases in Canada are growing much more rapidly than has been the case here. Is anybody in Montpelier paying attention to what is happening across our northern border?

“Total federal, provincial and territorial government health spending has grown by 8.1 percent annually, while the national GDP in Canada rose by only 6.7 percent during the same period.

In response to the rapidly rising costs, provincial governments have raised taxes and rationed care, increasing patient wait times. Provincial drug plans have also more often refused to pay for most of the drugs that are certified as “safe and effective” by Health Canada.”

The full Daily Caller article is here: http://dailycaller.com/2012/07/24/report-canadian-health-care-spending-unsustainable/

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As Vermont Goes, so Goes Massachusetts (Again)

A commentary in the Lowell Sun criticized the process and the product of legislation in Massachusetts to curb health care cost increases. Josh Archambault’s description sounds exactly like a repeat of what the Vermont legislature did in passing Act 48 last year:

“A mega agency is created and given tremendous control over how our health-care system will be set up and the method by which medical professionals will be paid. This bureaucracy will control what facilities get built where, why and when. It will have power over the future of medicine, with controls over medical innovation.

And state officials are given tremendous latitude to take appropriate actions, or establish when something is deemed to be excessive. This is ripe for political influence and future lawsuits, adding cost to our health-care system.”

The full Lowell Sun commentary is here: http://www.lowellsun.com/oped/ci_21132164/state-legislators-like-health-bill-without-understanding