Voting With Their Feet

The contrasts are both striking and troubling. We learned recently that 4 of the 11 pediatricians serving Franklin County are closing shop due to low Medicaid rates. Since November we’ve known Vermont’s expanding Medicaid program is short $38 million state dollars in the current fiscal year and another $54 million in fiscal 2017. Further, the disastrous roll-out of Vermont Health Connect has been front page news far too often, from no-bid contracts for Washington, D. C.  insiders to the inability to enforce basic eligibility requirements for Medicaid enrollees.

Yet, throwing caution to the wind, our state house leaders double-down on their government funded health care effort. The Governor anxiously awaits a waiver from Washington that allows Montpelier appointees to manage Medicare payments for Vermont’s seniors and the Speaker of the House aligns himself with single-payer lobbyists regarding the expansion of Dr. Dynasaur to Vermonters of all incomes up to age 26, adding a projected 120,000 new enrollees to this publicly funded program for “children”.

More generally, the U.S. Census reports that Vermont has lost population since 2012 and the IRS reports for calendar years 2012-2013 a net out-migration of Vermont income tax filers, with Florida being the top destination and gaining $52.7 million of net new filer income that once resided in Vermont.  Clearly, from pediatricians to taxpayers, Vermonters are voting with their feet and leaving Vermont. Imagine the out-migration to Florida of more Vermont seniors should the state take over the management of their Medicare payments.

However, where our leaders take us is not inevitable; it’s a choice, both theirs’ and ours. With a bit of courage at the statehouse and pressure from voters, starting with the 2016 budget adjustment and 2017 budget, the corner toward sustainability can be turned. Here are options in healthcare, among others I’m sure. 

  • Do no more harm: Approach the budget adjustment with the aim of bending the spending curve back toward sustainability. Given time constraints, if one-time funds are necessary to prop-up Medicaid spending in 2016, as recommended by the Governor, make the commitment to not rely on such funds in 2017. Further, abandon efforts for the state to manage Medicare payments and enroll young adults in Dr. Dynasaur.
  • Strengthen tort reform consistent with Hsiao Report: The Hsiao report, a foundational document for Act 48, extensively discussed, then recommended, tort reforms for Vermont which the legislature did not adopt. Hsiao projected such would save Vermont’s health care system, at minimum, 2.6 percent or over $130 million. Given Vermont’s high level of publicly funded health care, these savings would accrue significantly to that system.
  • Greater Equity in Health Care Payments: This 2015 Rand Corporation study, The Economic Incidence of Health Care Spending in Vermont, commissioned by the legislature’s Joint Fiscal Office, concluded the following: “While nearly one-third of low-income individuals spend less than 5 percent of their income on health care, about 21 percent of low-income individuals spend more than 20 percent of their income on payments for health care.”

    2015-01-06 RAND Economic Incidence of Health Care Spending PDF

    In view of this wide disparity and recognizing that health care payments include out-of-pocket expenses and premiums, redesigning the payment system such that enrollees in publicly funded health care, especially those between 139 and 317 percent of poverty, pay at least 5 to 10 percent of their income for health care will enhance equity and bring revenues into the system. Further, under the Affordable Care Act, premiums can be adjusted higher based on whether or not the insured smokes. 
  • Rationalize Health Care Benefits: Update the 2009 Medicaid Tiger Team report.

    Tiger EDS Final PDF

    This report included a comparative analysis of utilization limits on certain, mostly medical related, Medicaid benefits among peer state Medicaid programs. The comparative states were Rhode Island, Massachusetts, Wisconsin, Washington, New Hampshire, Minnesota, New York, Delaware, Arizona and Pennsylvania.  The analysis encompassed only beneficiaries 23 and older and was conducted before Catamount health care was implemented. The Tiger Team analysis identified $22 million in potential general fund savings if utilization limits adopted by peer states were adopted as well in Vermont.  

As with Vermont’s K-12 education funding, our state is a leader relative to eligibility for publicly funded health care.  We are a middle income state more generous than most. The above options would not diminish our relative standing and include both revenue and cost containment opportunities. These would more than solve the current budget shortfall, leaving taxpayers grateful for the thoughtful balancing of a troubled situation.

The concept of sustainable spending is well honored but reluctantly embraced. The concept applies to both the ability of taxpayers to pay and the ability of providers to be paid fairly.  With regard to health care, our current leaders have violated both these objectives. Expanding health care programs already busting the budget while pediatricians close their doors for lack of fair payment sends a clear message that fiscal leadership is lacking at the state house. Over the coming weeks and months, we must ask our leaders, both current and future, to abandon the platitudes and give us their specific and serious recommendations for solving the problems before us.

This commentary is by Tom Pelham, formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee, and now a co-founder of Campaign for Vermont.

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