Shumlin Administration: Contain Costs by Raising Cost of Providing Healthcare

by Angela Chagnon

Susan Besio, Commissioner of the Department of Vermont Health Access (DVHA), testified before the Senate Finance Committee this week concerning Governor Shumlin’s plan to roll Catamount Health into Vermont Health Access Program (VHAP).

The new program, which will be called VHAP Expanded, will mesh the eligibility requirements from both programs so that more people will be eligible for the coverage. The premium cost for VHAP Expanded, according to the proposed plan, will be $302 for a plan with a $1,200 deductible for an individual. The new plan won’t be implemented until October 1, 2011.

Pages 44 and 45 of the Budget Document on the DVHA’s website reads:

“Other than the deductible, current cost-sharing (co-pays, co-insurance) for Catamount Health Plan enrollees would no longer exist.

· The $500 deductible within the Catamount Health Plans would change to $1200 for VHAP Expanded.

· Similar to the existing Catamount Plan, preventive services would not count towards the deductible for VHAP Expanded enrollees. …

· The Employer Contribution would remain to help support this program ($7.6 m annually) and would be adjusted annually based on the change to the annualized VHAP Expanded pmpm (per member per month). …

· Provider reimbursement would be at the current Medicaid rates (It should be noted that, in order to mitigate any additional impacts of this reimbursement shift, the Governor is not proposing a reduction in non- hospital Medicaid provider rates to address the budget shortfall).”

Senator Randy Brock (R-Franklin) asked what the provider reimbursement rates would be under the new program.  Besio

Sen. Randy Brock (R-Franklin)

explained that VHAP Expanded would pay about 83% of the Medicare rate. She said the current Medicaid rates were, for a basic check-up, 78% of Medicare’s rate and payment for other services were between 58% and 78% of Medicare rates.

“It would be wonderful to pay at the Medicare rate, but we can’t afford it,” Besio remarked.

“Have you done any analysis as to what the likely result will be in terms of availability of care and providers willing to accept this group of patients?” asked Brock.

Besio said that the DVHA was still working on that. “One of the alternatives to deal with the $150 million General Fund deficit would be to take significant provider rate reduction,” she said. “This proposal is an alternative to that.” Besio said that the rate proposal was necessary to make up for the amount of people covered under the plan, which will go from 12,000 members to 140,000.

Besio also discussed the provider tax proposed by the Shumlin Administration. Under the proposal, the services taxed would expand to cover medical services such as nursing, chiropractic, dental, physician services and home health care services. The report shows that in FY2011, “hospitals are assessed 5.5% of net patient revenues (less chronic, skilled and swing bed revenues)” and nursing homes are “assessed $3,962.66 per licensed bed.”

The proposal for nursing homes will raise the assessment rate to $4,509.57 on July 1, 2011 and then that rate will go up again to $4,919.93 on October 1. Hospital rates will also be raised to 6% on October 1, along with the rate for home health agencies which will go from 17.69% to 19.30%.

Managed Care Organizations (MCOs) and Dental services are not currently taxed. But on July 1, 2011 MCOs will be “assessed 1.33% of all health insurance premiums paid to the MCO by its Vermont members in the previous fiscal year ending 12/31.” This is expected to raise $10 million in new revenue for the state.

Also on July 1, dentists will have to pay 3% of their “gross revenue from performing dental and other healthcare services.” The report goes on to say that “the amount of the [dentist] tax shall be determined annually by the Commissioner based on the practicing dentist’s calendar year gross revenues as reported to DVHA.” Besio noted that the dentist tax will raise about $6 million in revenue and will enable the state to draw down $9 million in Federal funds.

The Dental Society is opposed to the tax. Their website reads:

“The Vermont State Dental Society is opposed to this new method of taxation for a number of reasons. First, this tax will increase the cost of oral health care for all Vermonters as it will be passed on to the patient through higher dental fees. Second, this tax is not equitable as it is not being applied to all other similar health care provider categories. Finally, this tax will harm dentist recruitment and retention in Vermont since it will impact those with the highest overhead.”

Let’s remember what Bernie Sanders said recently. “If you’re going to provide healthcare to all of our people in a cost-effective way, you’re going to have to get rid of the private health insurance companies.”

Unfortunately, the Shumlin administration’s plan to “contain costs” may end up doing just the opposite. If Shumlin has his way, not only will Vermonters be stuck with a public healthcare plan with no funding, but the already high cost of healthcare will skyrocket due to the punishing taxes imposed on the healthcare industry. Private healthcare companies will take their business elsewhere rather than fund their government competition.