Don’t Agonize, Advocate

The Chancellor of Vermont State Colleges (VSC), Jeb Spaulding, rightfully laments that Vermont’s higher education institutions, including VSC, UVM and the Vermont Student Assistance Corporation (VSAC), have lost ground in the state budget. In 2014 through 2016 these institutions received between $88.8 million and $87.7 million. Governor Shumlin’s proposal for fiscal 2017 is again level funded at $87.7 million. Such flat-lined allocations impact the finances of not only the higher education institutions but also the students they serve. With one “budget gap” crisis after another year after year at the State House, driven mostly by health care expenditures, there’s little funding left for much else.

But Chancellor Spaulding is in a unique position to turn the tide in favor of higher education. After all, he’s a former Secretary of Administration as well as a former Chair of the Senate Appropriations Committee. Further, he’s in a position to call upon the help of other seasoned state house players. There’s Richard Cate, former State Commissioner of Education and now UVM’s Vice President for Finance and Treasurer as well as Senator Richard Westman, a VSAC manager now serving on the Senate Finance Committee and former Chair of the House Appropriations Committee. Chancellor Spaulding might call these folks together to roll up their sleeves and pursue this path for higher education funding.

Governor Shumlin has proposed increasing the fee/tax on mutual funds to raise $13.5 million. (In fact, state house scuttlebutt has this revenue source being hit even harder). He then proposes that $1 million of these new revenues fund a new program to create $250 college savings accounts for every Vermont newborn, with the remainder going to the general fund to bail out the Governor’s most recent Medicaid driven “budget gap”.  However, without limiting eligibility, reforms in Medicaid can address the Medicaid “gap”. With such reforms, the new revenues from mutual fund taxes can be used, for example, to support higher education institutions or lower property taxes by covering the cost for the state’s mandated but unfunded pre-K program now forced upon property tax payers.

Vermont has one of the most expansive Medicaid programs among the 50 states. As of December, 2015, 30 percent or 190,398 of all Vermonters were directly enrolled in Medicaid as compared to a national average of 22 percent. In 2003, with then Representative Westman as Chair of House Appropriations, Representatives Patty O’Donnell (R-Vernon) and I (I-Calais) successfully proposed and got enacted major reforms and efficiencies to Vermont’s Medicaid payment system. These changes basically eliminated almost all co-payments by converting the system to a more progressive and disciplined income based premium system. One can see this legislation here in Act 66 , the fiscal 2004 Budget Act (see Section 147).

More recently, here is a set of 21 tables recently published by the Kaiser Family Foundation (KFF) comparing Medicaid enrollment and cost sharing policies across the 50 states.

From the above there are two observations of note. First, when comparing Medicaid programs across the 50 states it is clear there exist numerous options among which states can choose to structure their Medicaid program. Medicaid is not a top-down, one-size-fits all federal program. In fact, Vermont has more flexibility in this regard than many states because of our Global Commitment waiver. Secondly, when comparing Kaiser Family Foundation premium and co-pay data profiling Vermont with that established in 2003 by Act 66, it’s clear that many premiums and co-pays have not been adjusted for inflation and in some instances  have been reduced or eliminated since 2003.

The above observations are not new. In 2009 a team of talented and seasoned state employees undertook an analysis and issued this report - A Path to Medicaid Savings

The Executive Summary of the Report concludes the following. “The original goal of the EDS/Medicaid Tiger Team was to identify expense reductions or revenue enhancements that save 5% ($50 million) of the $1 billion total spending in FY09. We believe this paper identifies options of this order of magnitude.”

Further, this recent Rand Corporation Report to the legislature shows that low and moderate income households of equal income levels pay widely different proportions of their income for health care insurance. (See Tables A.9, A.10, A.11)

The Rand Report concludes: “We find that people with the same income levels often pay very different amounts for health care, suggesting that horizontal equity in the state is limited. For example, 27 percent of individuals with incomes below 139 percent of FPL will pay less than 5 percent of income on health care, while 21 percent of these individuals will pay more than 20 percent of their income on health care. This finding is driven partly by the fact that people with the same income levels get health insurance through different sources. For example, a person with income below 139 percent of the federal poverty level (FPL) could be enrolled in Medicaid, employer coverage, or Medicare; that individual could also be uninsured.”

The additional resources that Chancellor Spaulding seeks for higher education are not going to fall from the sky. Further, it is perfectly clear from the above three cited reports that options exist to rationalize and make more efficient both the revenue streams and expenditure profiles of Vermont’s Medicaid and publicly funded health care programs. Cost saving reforms of just 3 percent in these programs would yield over $37 million, with the state dollar share comprising almost half of such savings. Given this, the Medicaid “budget gap” can be addressed within the Medicaid program, and Chancellor Spaulding might look to the new mutual fund revenues to support higher education budgets.

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