The rationing commission moves a step closer

by Robert Maynard

It looks like “the rationing commission” just took a step closer.  Back in April I posted a commentary entitled “Hence cometh the rationing commission”, which pointed out that the hospital budget cap set by the Green Mountain Care Board would likely lead to health care rationing.  The article noted how the imposition of “global budgets” on health care spending has been a a common practice of government run health care systems from all over the world.  This practice has led to rationing, which has negatively impacted the quality of care.  Now it looks like the rationing of care has taken a step closer here in Vermont as at least two hospitals have exceeded the cap set by the Green Mountain Care Board.  According to a Vermont Digger article, Fletcher Allen has seen a 7.87% increase it its budget for 2013.  The threshold set by the new board was 3.75%.  What we have here is a doubling of the target envisioned by the new board, who were not impressed:

Anya Rader Wallack, chair of the board, said in an interview that the board invited Fletcher Allen officials to the meeting. “We didn’t see how all of the expenditures they suggested were a slam dunk within our guidelines,” Wallack said.

Act 171, which went into effect on July 1, gives the Green Mountain Care Board the authority to regulate hospital budgets across the state. That role was formerly the purview of the Vermont Department of Banking, Insurance, Securities and Health Care Administration — now known as the Department of Financial Regulation. The board placed a 3.75-percent cap on the amount of additional funds that hospitals can generate from patients (also known as “net patient revenues”) this fiscal year. Hospitals were allowed, however, to seek certain exemptions from the cap.

The statement by Wallack highlighted above illustrates the fundamental difference between a government controlled health care system and based on patient choice.  Under the system that our government is moving towards, healthcare spending “guidelines” are set by a government bureaucracy, not by an agreement between doctors and patients.  In most places where the government is in control of health care, any expenditures that do not meet government determined “guidelines” are rejected and the rationing of care is the result.  In this case we have a situation of the state’s largest hospital more than doubling the Green Mountain Care Board’s spending target.  Apparently that extra spending did not comply with the board’s guidelines.

The problem is not confined to Fletcher Allen, according to another Vermont Digger article:

The cumulative patient generated revenue across all 14 Vermont hospital budgets is slated to rise 5.84 percent in Fiscal Year 2013. That is an increase of roughly $142 million from last year, bringing the total hospital revenue base for Vermont up to about $2.1 billion.

This number comes from the Green Mountain Care Board today, which finished its initial review of state hospital budgets. After that review, it rejected budgets from Middlebury’s Porter Medical Center and Morrisville’s Copley Hospital. Even when the board made every requested exemption asked for by the two hospitals, the two budgets still came in above the 3.75 percent cap in exemption-included revenue increases.

Green Mountain Care has hardly begun and attempts are already being made to control costs by bureaucratic decree.  From the looks at how widespread the non-compliance with the board’s targets are, it appears that we are headed towards some serious rationing of health care.  The failure of this approach to control cots should come as no surprise.  In a September 2007 True North commentary, I noted that then Speaker of the Vermont House Gaye Symington zeroed in on a lack of discipline as driving up health care costs around the nation.  Speaker Symington was quoted in a September 14 2007 Eagle Times article identifying the factor driving up health care costs: We are paying for our lack of discipline” by becoming more overweight as a nation, she said, hoping a change in administration in Washington, D.C. will lead to the issue being dealt with a national level.

It is obvious that Speaker Symington saw government action at the national level as the solution and Vermont has been taking government action toward health care reform at the state level for a while now.  The problem is that this approach has simply made matters worse.  Starting with Community Rating and Guaranteed Issue in the early 1990’s we wrecked our private insurance market and removed free market incentives for engaging in healthy behavior.  Is it any wonder that we are seeing cost increases that some political leaders are attributing to a lack of discipline?  When well connected political forces wage a campaign insisting that health care is a human right, they send the message that cost is no object and that people are entitled to the care they desire regardless of the cost.  This is especially so when they decry the fee for service model of health care and seek to replace it with a government run model.  Now, instead of free market incentives to keep costs down by engaging in healthy behavior we have spending guidelines imposed by an unelected board of government bureaucrats.