1Rep. Anne Donahue
Legislative Update
October 27, 2008
Health Care: Part II
A few weeks ago I shared my thoughts on why Vermont is going the wrong direction in health care reform.
One constituent responded, “I think it would be helpful to hear your specific suggestions in addition to the criticisms of the current efforts.” Point well taken.
The basics:
1. I believe employer-sponsored health insurance has outlived its usefulness, and we need to move away from this accident of history that grew into the convoluted financing system we have today. Health care coverage provided through employment amounts to a regressive tax mechanism for providing uneven coverage for many, but not even all, citizens.
2. I believe there is ample evidence that a “single payer” system, which I would describe as a “tax-based” or state-sponsored system, is not viable as a state-level reform. There is too high a percentage of health care in Vermont (roughly two-thirds) that is funded through sources that we cannot regulate: that which is fully [Medicare] or partially [Medicaid] federally controlled, and the sector of private insurance that is federally regulated. Major change will require federal change.
3. Given those premises, these are two core steps that we can and should be taking to move us forward in Vermont:
a. steadily increase (instead of decreasing) the percentage we pay of the actual costs of the health care we buy in state-run programs; and
b. expand implementation of the regulatory tools we already have to determine which capital expenditures we can afford based upon needs in the system as a whole.
Paying Actual Cost
Vermont has more individuals on state-supported health care than almost any other state, but we also pay a lower share than actual cost of almost any other state. For hospitals, that means setting highly inflated rates above actual costs of running the hospital, so that they can negotiate “lower” rates with insurance companies that are still high enough to also cover for the actual costs of services that the state underpays.
Hospitals can stay solvent by shifting these costs, but physicians cannot; they join hospital-based practices or leave Vermont, contributing to our physician shortage.
Despite underpayment, we also have huge deficit projections each year for Medicaid programs: for FY 2010 it now exceeds $60 million.
Paying for what we actually buy would mean a health care tax. But it is a tax we actually are already paying, just through a more convoluted route, through higher private insurance premiums. The higher premiums then drive cost increases in every other sector, because employers are bearing the bulk of the cost. “Employers” means our schools and state and local governments, as well as private business.
This wouldn’t change the current private market, but it would change the cost distribution of state-sponsored health care to a more progressive, fairer, tax system, instead of being partially distributed through insurance premiums.
The challenge of implementation is to ensure the recapture of the money saved in reduced premiums, so that we are paying the tax with the increased cash flow we receive due to the reduced cost of premiums – including recapture in salaries.
But it would be more honest about who is paying for what than we are now, and it would establish the viability of truly taxed-based health care as social policy. Medicaid and Catamount survive as “single-payer” health care only because they are privately subsidized. Are we willing to pay for what we claim to be buying?
Implementing Stronger Regulation
Small steps in beginning to address how we pay need to join with steps to address what we can afford to buy.
Individual “cost containment” – only using what we really need individually, which is usually less than what we want and think we need – generally won’t happen, because our human nature insists that if it is available, we want it and have a right to it.
It has to be demanded of us as a whole through a choice to empower the state the authority to limit access. Vermont is a rural state. On a medical need, per-person basis, we have too many hospitals. We want the accessibility that is usually generated by a larger population base.
We just celebrated the groundbreaking for a new radiation-oncology center at Central Vermont Medical Center. Did we need more of those services? No. We made a policy choice that traveling to Burlington or Hanover was too far.
If you watch the advertising wars between Gifford and CVMC, you will see the impact of such choices. Ever since CVMC received approval and built its new birthing center, there has been an oversupply of maternity beds. So they are competing for the same babies, and carrying the fixed costs of empty beds. This is health care “competition” that drives cost up, not down.
Every month, new projects come before our state health regulators. I believe we need to press for stricter enforcement of statewide resource allocation standards.
This is an area where we can, right now, begin to make policy choices that bend the cost curve. We also put to the test our social will to make the kinds of trade-offs that affordable health care demands.
If we aren’t willing to make those choices now, then why would anyone think that we could gain social consensus to turn yet greater health planning authority over to centralized decision-making?
You thoughts on this and other topics are welcome. You can always email at counterp@tds.net or leave a phone message at 485-6431. This and past updates are also now accessible on my blog, http://annedonahue.blogspot.com.