Vermont’s Single Payer System Slow Down

On May 28, 2011, Gov. Peter Shumlin signed Act 48 into law, which calls for a three-stage implementation of a publicly-financed universal health care system by 2017. The goal of Act 48 is an eventual state-funded and operated single-payer system. It’s three years later, however, and what momentum the Act had is starting to slow down, especially as the Governor is expected to release the finance plan for the project.

Single Payer System Design.

Vermont’s move to a single payer system was designed to meet the federal requirements the Patient Protection and Affordable Care Act (P.L. 111-148) (ACA). In doing so, it may take advantage of federal monies targeted for Vermont’s Health Insurance Exchange and to petition for federal waivers that would streamline Vermont’s reform. The system should extend coverage to each of Vermont’s 620,000 residents while containing soaring health care costs.

Vermont’s plan establishes a state Health Insurance Exchange, as mandated by new federal health care laws, that will offer coverage from private insurers, state-sponsored and multi-state plans. It also will include tax credits to make premiums affordable for uninsured Vermonters. The exchange will be managed by a five-member board which sets reimbursement rates for health care providers and streamlines administration into a single, unified system. On the Exchange, Vermont residents and small employers will be able to compare rates from a variety of plans and enroll in the plan of their choice. Among the criteria are adoption of a financing plan by 2014; ensuring the new system costs less than the current fee-for-service one; and obtaining federal permission via a waiver to allow Vermont to proceed with the single-payer option, in around 2017.

Benefits.

There are many benefits to a single payer system. When the government owns and operates one health insurance plan for all residents, it sets a single price for each medical procedure. These prices tend to be lower because the government is negotiating one rate for all citizens. Administrative costs are also lower because there is no insurance company. Physicians send their bill to the federal government.

Problems.

Of course, it’s not quite that easy – single payer system also has several problems. First, the government is the one to make difficult decisions about what benefits will and will not be covered. It could theoretically be up to the government to determine whether or not a patient will receive things like prescription drugs or dentist visits. Some single payer systems are associated with longer wait times for medical care, however a recent study by the Commonwealth Fund found that while some single payer systems have longer wait times, others see patients quicker than here in the United States.

Pause in the Process.

Under Act 48, Governor Shumlin was required last year to outline some financing options for lawmakers to consider but that has yet to be done.  The legislation required that the state provide an outline on how it plans to raise the estimated $1.7 billion to $2.2 billion to finance the future single payer system. At the beginning of the current legislative session, the governor said a menu of financing options would be released in April for legislators to discuss. Now, Governor Shumlin says he will wait until 2015 for the release. Despite the delay in developing the financing plan for the state’s single payer system, Shumlin said in a recent interview that he still thinks there’s enough time to meet his target date of 2017 for Vermont to become the first state in the country to implement a single payer health care system.

“I believe that we will collectively come to the same conclusion, that moving to a system where you spend less money for better quality and better outcomes,” said Shumlin. “Combined with a payment system where we all, based on our ability to pay, (will) lead to prosperity and an affordable quality health care system for all.”

He offered a slightly different reason for the stall in another interview last February, when he said the decision to delay unveiling the finance options was made over the past several weeks. “We have a very good business advisory group … that’s helping us to put together a package that will work for Vermonters as well as for businesses,” he said. “As we’ve gotten into the weeds of the various details that need to be ready to lay out a menu of options, there’s pretty broad agreement that we’re just not there yet.” Either way, it’s clear Vermont needs more time.

Fresh Faces to Figure Things Out.

Governor Shumlin has made some new hires to help him with figuring out details for the Exchange. Agency of Commerce and Community Development (ACCD) Secretary Lawrence Miller will become Senior Advisor to the Governor and Chief of Health Care Reform, where he will be tasked with overseeing the state’s health care reform efforts and transition to Green Mountain Care. He will report directly to the governor. Patricia Moulton will replace Vermont Administration Secretary Lawrence Miller when he moves up to advise the Governor.

In a recent interview, Miller commented, ““We know that concern about health benefits holds people back from striking out on their own and starting new businesses, and it keeps people locked in jobs for the wrong reasons…Health insurance is also a huge cost factor for all enterprises, including our schools.  We obviously have to do something different. I am encouraged that Vermont’s efforts at cost containment are beginning to bear fruit, and I am ready to help move us forward.”

Global Budget Payment.

Recent reports indicate that at least one hospital in the state will begin testing a “global budget payment” system. Global budgets are set payments determined by state regulators to care for the population a hospital serves, as opposed to the hospital billing for each individual service it provides. With this program, if the hospital exceeds its budget it loses money. The budget is based on the hospital’s historic revenue with adjustments for inflation and changes within the population it serves.

For more information on health reform in Vermont, please see Michelle Oxman’s post, “Highlight on Vermont: Implementing the ACA on the Road to a Single Payer System,” from February, 2014. She reviews the struggles Vermont is having with its Health Insurance Exchange and the state’s struggle to provide coverage for its uninsured population, which is the highest in the country.

Looking at Bobby Jindal’s Health Care Proposal

Recently Louisiana governor Bobby Jindal announced a proposed plan to replace the Patient Protection and Affordable Care Act (ACA) (P.L 111-148). This plan draws on Republican proposals, including HR 3121, the American Health Care Reform Act released in September 2013 by the Republican Study Committee, but addresses some issues that the existing bill does not. Jindal claims that his proposal would protect low-income individuals and those with preexisting conditions, reduce premiums, and provide consumers more choice, including the choice not to buy insurance. What does it include?

  • Elimination of the exclusion of employer-sponsored health insurance (ESI) benefits from the gross income of employees;
  • A “standard deduction” for all health insurance purchased by the individual taxpayer, whether through an individual or group policy;
  • Bloc grants for Medicaid, with state flexibility to tailor benefits to populations and to require participation in wellness activities;
  • Increased use of Health Savings Accounts, combined with high-deductible insurance plans;
  • Premium subsidies for low-income individuals and those with preexisting conditions;
  • Allowing insurance sales across state lines without regard to mandated benefits or local capitalization requirements.

Jindal says that the first priority is to bring costs down. He attributes the higher-than-average spending on health care in the United States to several causes, including: (1) lack of transparency in pricing of items and services; (2) the exclusion of ESI from employees’ income for tax purposes; and (3) low copayments that insulate consumers from the true cost of services. To illustrate the dysfunction of our health insurance system, Jindal compared it to homeowners’ insurance. If our homeowners’ policies worked the way our health insurance does, every time a light bulb burned out, you would have to go to a specialist, who would tell you what kind of light bulb you should buy, and then drive across town to a network hardware store. Because your only cost would be your copayment, you would have no idea what the light bulb cost or whether it would have been less expensive at a neighborhood store.

But the comparison doesn’t work. Homeowner’s policies pay for repairs of serious damage, not ordinary maintenance. And regular, recurring costs of continuing prescriptions and physician visits for chronic illness aren’t equivalent to regular purchase of light bulbs.

Guaranteed Access for People with Preexisting Conditions

Jindal would repeal the guaranteed renewability requirements of the ACA. There would be no ceilings on premiums, and no minimum medical loss ratio. Covering people with preexisting conditions would not be the responsibility of insurance issuers. Rather, the states would operate high-risk pools with $100 billion of federal funds. High risk pools, by definition, insure people who would not have qualified through medical underwriting. According to CMS, a high risk pool may charge up to twice the premium that a healthy person of the same age would pay. Many, if not most, individuals in high risk pools have a deductible of $2,500 or more, according to the Kaiser Family Foundation.

In his proposal, he accuses the Obama administration of breaking its promise of guaranteed renewability to people with preexisting conditions because the government’s Preexisting Condition Insurance Plan (PCIP) froze enrollment in 2013 due to insufficient funding. A report issued January 31, 2013 stated that expenditures had increased to an average of $160 million per month by May 2012. Unlike other high risk pools, the PCIP covered preexisting conditions immediately, and it was required to charge the premiums normally charged to healthy people. Although fewer people signed up than the government originally anticipated, those who did sign up had very high expenses. In fact,according to the Washington Post, the costs per enrollee were more than twice what the actuaries predicted in 2010. A high risk pool is the ultimate in adverse selection—because enrollment is limited to people who are otherwise uninsurable, it cannot help but lose money. The ACA brings those individuals into the same pool as the rest of us, spreading the risk more evenly.

Jindal says that guaranteed renewability means being able to renew the same coverage unless the insured has committed fraud. He contends that the guaranteed renewability of the ACA is “a lie” because companies discontinued coverage that would not meet the coverage requirements of the new law. But if the coverage wasn’t comprehensive to begin with, the insurance under the ACA would offer more protection.

Equity and the Standard Tax Deduction

Jindal argues that the exclusion of health insurance benefits from employees’ income for tax purposes is unfair to people who buy coverage in the individual market. He argues that everyone should have the same tax benefit with respect to health insurance. Jindal’s proposal, which does not state the amount of the deduction, notes that a taxpayer who paid less for the insurance would still receive the full tax benefit and says that this would encourage people to shop more effectively to maximize their savings. Section 201 of H.R. 3121, the Republican proposal, would allow a standard deduction of $20,000 per month for family coverage, and $7,500 per month for individual coverage. In states with high risk pools, beneficiaries pay several hundred dollars per month. With a standard deduction of $240,000 per year, not many people who buy insurance would pay income tax at all.

Medicare Cuts, ACA Repeal Proposed in Paul Ryan’s 2015 Budget Proposal

House Budget Committee Chairman Rep. Paul Ryan (R-WI) released the House GOP budget for fiscal year 2015, in a proposal that would reduce federal spending by $5 trillion. Ryan’s proposed “Path to Prosperity” contains controversial changes to Medicare and a proposal to eliminate the Patient Protection and Affordable Care Act (P.L. 111-148) (ACA). It also contains major changes to social safety net and low-income assistance programs.

Medicare Reform

Ryan’s Medicare reform proposal includes changes to the Medicare Part A Hospital Insurance Program, Part B Supplementary Medical Insurance Program, Part C Medicare Advantage Program, and Part D Prescription Drug Benefit, as well as premiums paid by qualified aged and disabled beneficiaries. Under the current system, Ryan contends, “Medicare is an open-ended, blank-check entitlement that operates under a rigid and bureaucratic fee-for-service payment system.”

Ryan’s proposal to overhaul Medicare includes changes that would provide for Americans who turn 65 on or after January 1, 2024 to choose between private insurance plans with government subsidies to help pay for the chosen policy’s premiums, or stay in traditional fee-for-service Medicare within what Ryan calls the “Medicare Exchange.” Seniors who are currently 55 or younger would be required to participate in the alternative system of “premium support,” under which a support payment would be paid by Medicare directly to the plan or the fee-for-service program to subsidize its cost. The program would operate in a manner similar to that of the Medicare prescription-drug benefit. Ryan emphasized that his proposal still gives seniors the choice of remaining in regular Medicare; however, seniors required to move to private plans may find themselves with different doctors and less coverage.

A long term solution to the “doc fix” is also offered as part of the proposed budget. Medicare’s physician reimbursement formula, called the “sustained growth rate” has threatened steep reductions in physician payments. The problem has been patched 17 times prior to 2014 with various increases in physician reimbursement, in a practice that is known as the “doc fix.” Ryan’s proposal “accommodates legislation that fixes the Medicare physician-payment formula for the next ten years so that Medicare beneficiaries continue to have access to health care,” instead of relying on it to be adjusted much more frequently.

ACA Repeal

Ryan’s budget contends that the Congressional Budget Office’s (CBO) “Budget and Economic Outlook: 2014 to 2024,’’ says the ACA will discourage work, along with other reasons, and therefore, it should be repealed. The budget reasons that people will receive smaller health insurance subsidies as they begin to earn more money, basically discouraging people from working. Another reason for repeal noted in the budget is the extra spending on Medicaid required by the ACA. According to the budget, the ACA adds even more liabilities to the budget due to the millions of new beneficiaries that the law drives into the program.

Ryan proposes to repeal the exchange subsidies provided under the ACA. He believes the subsidies undermine the competitive forces of the marketplace and that government mandates will drive out all but the largest insurance companies. If removed, Ryan notes, “repeal of the insurance subsidies and other exchange-related spending would save roughly $1.2 trillion over ten years.” This amount does not take into account other savings Ryan believes would be realized from a repeal of the ACA.

Safety Net Programs

Ryan’s budget proposal does not lay out a full welfare-reform plan, but proposes changes Ryan believes will take steps toward reforming these programs in an effort to encourage work, increase economic growth and jobs, and preserve the safety net. Included in the budget are what Ryan proposes are methods to: (1) allow states to customize Supplemental Nutrition Assistance Program (SNAP) to the needs of their citizens; (2) empower reformers at the state level to strengthen and secure Medicaid by allotting states a single amount of money to spend according to their needs; (3) address barriers to upward mobility; and (4) expand welfare’s work requirements.

Mental Health Integration is a Priority for the Rhode Island Legislature

Finding ways to bring more behavioral health services to more residents of Rhode Island is high on the agenda for consideration this year in the Rhode Island Legislature.  The Health and Human Services Committee of the Rhode Island Senate considered a number of bills recommended by the Special Joint Legislative Commission to Study the Integration of Primary Care and Behavioral Health on Tuesday March 25, 2014.  The Commission was created by an Act of the legislature in 2013 and submitted its report in March of 2014.

Need

The Special Joint Commission was empowered to examine “the current behavioral health and primary care system in the Ocean State, and with identifying opportunities to further integrate clinical and payment reform and examine the feasibility of establishing a primary care trust.”   Behavioral health services includes treatments for  mental health conditions, substance abuse, and health-related behaviors. The Special Joint Commission found that (1) additional training of primary care practitioners and behavioral health practitioners is needed to complete integration of the two health care systems, (2) opportunities for collaboration between theses types of providers needs to be embedded in their systems, (3) a strong financing component is needed to achieve success, (4) parity of insurance coverage needs to be achieved in Rhode Island, and (5) better data on behavioral health disorders needs to be collected in Rhode Island.

The Special Joint Commission found that one in five Rhode Island children ages 6 to 17 has a diagnosable mental health or addictive disorder, while one in 10 has a significant functional impairment, and that these kids are not receiving treatment through the schools, communities or clinical settings despite showing symptoms or “action signs.” In addition the Special Joint Commission pointed to an Institute of Medicine report which found that the number of adults over 65 with mental illness is expected to double by the year 2030. Compounding that fact is the rate of growth of this segment of the population over that time period will result in 25 percent of Rhode Island’s residents being 65 or older.   The Special Joint Commission underscored the need for integration, as Rhode Island has the highest rate of adults with serious mental illness at more than 7 percent of the population, which far exceeds the national average of 4.6 percent.

Legislation

The legislators who were members of this Special Joint Commission introduced a package of bills to address these findings. Primary among them is the Behavioral  Health Reform Act of 2014. This  bill would require behavioral health screenings to be conducted by primary care physicians during primary care exams given to anyone under 21. The screening shall be for psychiatric, psychological, interpersonal, or any other condition.   The Rhode Island Department of Health is to certify appropriate screenings and establish a fee structure for these screenings.  In addition the screenings will be mandated to be covered by  all health insurance providers.

A second bill in the package would require insurers to make a decision on whether to authorize emergency inpatient or residential treatment for mental, emotional, or substance abuse within two hours of receipt of all the necessary paper work having been submitted.  A third bill in the package amends the existing mental health parity law to ensure that substance abuse and other behavioral health issues are covered like other mental health conditions.  All of the bills await further action by the committee.

Integration of care, where behavioral health care providers work within and as part of a primary care team, was the best method of care delivery, the Special Joint Committee found.  Other coordinated care concepts, such as having primary and behavioral health care providers at separate facilities, were found not to be as effective, according to the Special Joint Commission. The lack of appropriate billing codes was found to be a barrier to obtaining behavioral health services, as were wide variations in co-pays and prior authorization requirements for behavioral health services, said the Special Joint Commission.

“We must strive to embrace the cooperative care model of practice, where there is no ‘wrong door’ for full access to comprehensive care,” said Senator Joshua Miller, Co-Chair of the Special Joint Commission. “If a patient enters through an emergency room, doctor’s office, or a clinic the patient should be connected to  health services that include a full range of needed behavioral treatment approaches,” continued Miller.  The Rhode Island Legislature is in session until July and action on all of these proposals is expected before adjournment.