Rep. Anne Donahue

Legislative Summary

May 24, 2008

Six years ago, property taxes and increasing school costs were the hottest political issue, although I argued that the biggest issue behind them – and looming in front of us – was the rate in the increases in cost of health care.

We passed Act 68, a half-hearted reform effort that attempted to make the connection between local spending and local property taxes more explicit. We also passed a bill I had introduced, Act 53, that focused on statewide planning to get a handle on health care costs.

Four years ago, when health care catapulted to the top of everyone’s agenda and the focus was on those in Vermont with no insurance, Catamount Health was created.

As I look back on the most recent two years, it is clear that the property tax burden became a priority for taxpayers again, while sustaining and improving upon health care reform initiatives remained a primary issue. So what should the report card be on what we accomplished this session?

Certainly some prominent issues made clear progress, while others did less well. Environmental protection, both locally and globally, were big winners.

We passed major initiatives in protection of groundwater and the current use program that protects undeveloped land; we increased the accountability of Entergy Vermont for its nuclear power plant without forcing its clean energy production to grind to a halt, and we created significant new energy efficiency programs and incentives. I supported all of those.

Housing, a massively under-rated crisis, fared less well. For both individuals and our economy, our inadequate housing stock is a major burden, and the bill we passed will do little, if anything, to support and encourage new housing stock.

Transportation gained vital support despite a shrinking budget through the wise decision to increase state bonding. In inflationary times, we will pay back for infrastructure costs at a lower cost as the dollar is devalued. Unfortunately, this remains a drop in the bucket for a long underfunded state government obligation.

There was less visible but essential work done in restructuring our Family Court system and our public assistance “Welfare to Work” efforts – legal changes that were time-consuming projects in my Human Services committee similar to policy updates in other areas that get little publicity but constitute some of the fundamental work product of the legislature.

The budget we passed – as discussed in detail in my summary two weeks ago – was an embarrassment. We deferred, instead of addressing, the economic shortfalls, which will double the impact of a weak economy next year.

And that brings us full circle to the issue of property taxes and health care.

Expect a nasty new hit in property taxes next year. Our appraisal system is based upon a three-year rolling average, which buffered some against rapid increases but will now delay protection from taxes that are based upon property that decreases in value.

For the current year, 2008, there was some one-time money as well as the true up of the general fund transfer to the education fund that helped lower rates. For 2009, our pre-kindergarten bill will add further costs, and Medicaid money for special education is being restrained at the federal level.

We began the session with a commitment by legislative leadership to address education funding with a clean table: look at what we expect of education; what it costs to provide that; and then how to raise the money most fairly. It didn’t happen that way.

Instead, last year we mucked around with local voting methods in a poorly thought-out, last minute compromise between the Republican governor and Democratic legislative leaders.

The House attempted this year to repeal that “two-vote” approach, but Senate leadership refused to take it up. It will require districts that increase their budgets by a high percentage to divide the question into a basic budget and an “excess spending” budget. The only likely outcome in the affected districts will simply be more votes taken when the cuts that the “basic budget” would create become clear.

The governor’s short-sighted proposal to lease the lottery for a one-time injection of cash was not supported by either Democrats nor his own party, but other solutions that were offered at restructuring financing went nowhere.

The bottom line is that how we pay for soaring costs is only the detail behind the real problem: how do we address soaring costs that we can’t afford? That brings us back to the health care issue and the economy.

In health care, we have a parallel problem. No redistribution of how we pay for it will have a real impact on the fact that costs are rising at a level that our economy – meaning us – cannot afford. In many ways, health care is similar to the broader economy in the limitations of what individual states can do.

We can’t control oil prices, no matter what kind of resolutions we wasted hours debating asking Congress to act. We can’t control much of the health care “industry,” because such a large percentage of it is federally controlled.

But if we look at the steps we can actually achieve in health care, both in evening the cost burden to create broader accessibility for all, and, underlying that, by reducing cost increases, we need to recognize that many of the “reforms” of the past four years are only taking us backwards.

The issues are complex, which is why apparently simple solutions can be so misleading. The only government-run health care programs we have had have survived only because they are subsidized by private insurance: something we call “the cost shift.” Any public funding must address that reality first, and we are not doing that.

Vermont has made progress in expanding coverage to more Vermonters only because we pay nearly the lowest percentage of cost in public dollars of what the system actually costs to run. Without addressing that – without fixing Medicaid first – expanding such programs are doomed to being unsustainable as health costs rise.

Medicaid continues to drain more from health care reimbursement, and to increase the cost shift, than either Medicare or the cost of free care to the uninsured.

Despite underpaying, we struggle each year to pay the deficit for that portion we do reimburse to health care providers. Catamount Health, which was supposed to pay “at cost,” has not achieved that.

Worse still, next year, in the face of increasing public expectation and demand that it expand coverage, it will confront either a big leap in premiums for participants or a steep and unaffordable subsidy by the state. We also knew from day one and have yet to confront the fact that we only have a five-year deal with the federal government for its funding portion of our reform experiment.

There has been some fanfare claiming that we reduced the cost shift this year. That simply isn’t so. The $16 million “restored” to hospitals was mostly with contingency money, and it only “restored” what the governor, in a very ill-advised budget recommendation, proposed to cut. So it didn’t even actually keep the hospitals even on Medicaid reimbursement.

Catamount does not reduce the cost shift by moving uninsured folks to a program that meets the costs of the care provided. It adds money into the system, but it does not recapture that money on behalf of the private insurance cost shift.

In the same way, the insurer cost savings projected through giving electronic technology to physicians is not recaptured in any mechanism in the bill we passed, but it adds between $16 and $32 million in costs to private insurance rates over the next several years.

We are turning this money over to a private non-profit organization for oversight. I argued on the House floor (and proposed an amendment) that we needed to require greater accountability from the group, which is still new and has a weak organizational structure. The majority denied the organization’s weaknesses and defended the bill.

Just last week – with the bill safely passed – these same leaders from the Health Care Reform Commission flipped positions and wrote a forceful letter to the organization demanding a stronger governing structure.

We are spending more money than we can afford under a plausible intent of eventually saving money, but we are not looking at the bottom line issue: we spend too much on health care in the United States; both more than we can afford and more than we need.

When we compare to other nations and point to their better health outcomes and lower costs, we miss the most fundamental reason. They use less health care: everything from fewer MRIs, to fewer treatments that make us feel we are “doing something” when doing nothing makes more sense, and to fewer private doctor-patient choices that may not be based on the best science.

What we want and demand, for ourselves and in equal access for everyone, does not always bring about the best outcomes.

One of the many studies we paid for last year (we’ve added more again this year) was essentially ignored. It asked for a review of funding mechanisms. A conclusion? None of them really matter, because no funding mechanism can survive the rate of growth in our costs.

Private insurance is a money monster; government-run Medicaid is a money monster; our state reform initiative, Catamount, is becoming a new money monster; and they all contribute to the costs of running government, running businesses and feeding our education money monster. Figuring out new ways to feed the beast is not a solution.

Act 53, passed six years ago, suggested that the first step we ought to be taking is reviewing every significant new expense based on a statewide cost and need review rather than on its individual merits.

It would have begun to bring a more impartial review of what costs are really necessary. That part of Act 53 has never been implemented. We don’t want to say “no” to more health care.

Giving greater access to everyone of what some of us have may sound like reform, but it’s not.

Where do we see a direct example in our own community? In the advertising wars between Central Vermont Medical Center and Gifford hospital for use of their birthing centers. If they did not, in combination, have greater capacity built than the need so that Central Vermont could compete with Gifford for births, we would all be paying a little bit less into the system.

The legislature’s progress in grasping the fundamentals of true health care reform, in my mind, gets an F. We continue to drive up costs in the name of full access. That only further defeats access. We may not be able to do a lot as a single state, but what we are doing is counterproductive.

Please stay in touch with your own views and with ways I can help to serve you. Leave a message any time at 485-6431 or by email at counterp@tds.net