Analysis: Campaign Fails To Clarify Health Care Plans

10/27/12 10:00AM By Hamilton E. Davis

Whoever wins the gubernatorial race in Vermont, the campaign has pretty much failed to illuminate the issue of health care reform, one of the most momentous the state has ever faced. Health care now eats up 20 percent of the state's economic output and there is a broad consensus that the current trend is unsustainable.

Much of the responsibility for this failure falls on the Republican challenger, Randy Brock. But the Democratic incumbent Peter Shumlin has exacerbated the problem by talking and acting as though a decision to move the state to a single payer system has already been made, when in fact it hasn't.

As of today, Vermont has not met a single condition necessary to get to single payer and it's not likely to for two years-at least. It certainly has an intention to take that route, but our experience in the failed health care reform in the mid-1990s showed us just how difficult the whole problem is.

Brock and the Republican high command could have engaged on the tangle of issues subsumed in reform, but in their eagerness to flog Shumlin on the issue they have gone completely overboard: their ads on the question of health care reform look like a trailer for a horror movie.

The Shumlin administration has cooked up a "Five Billion Dollar Secret ," the ads say. Single payer will generate the "largest tax increase in Vermont history," and their rhetoric over the course of the campaign shrieks that such a tax would destroy the financial integrity of the state. They also claim in their ads that single payer will lead to long waiting lines for patients, price controls, rationing, loss of choice of doctors, and an exodus of doctors from the state.

Moreover, Brock's own prescriptions fail to pass any straight-face test. He has swept up every platitude and cliché about the health care dilemma, but the whole prescription doesn't add up to much. We need patient-centered health care, he says, but without any clear idea how to get it.

Cost containment will flow from more competition among insurance companies, he says. But soaring health care costs over the last 40 years, from one end of the country to the other, have been accompanied by all sorts of insurance company competition.

We shouldn't turn the fate of the health care system over to "unqualified, unelected" bureaucrats like the Green Mountain Care Board, Brock argues. Even if it were true that the board is unqualified it would be a disaster to start electing health care regulators, or any other regulators for that matter. Of course you could eliminate regulation altogether, but that makes no sense and will never happen.

So, in the light of this political thunder, where lies reality?

A not-bad place to start is Act 48, the so-called single payer bill passed by the Legislature in 2011. The most important components of that bill are now enshrined in 33 VSA Section 1822. This section of state law says that you can't move to single payer before meeting a series of conditions. They include:

-- The Legislature must enact a law establishing the financing for Green Mountain Care (meaning single payer). The Legislature of course has not done this and is not likely to do so for at least two years and more likely four to five years. No one, including the Shumlin administration, has any idea what health care costs will look like out that far.

-- A major reason for that is the requirement in Section 1822 that "financing for Green Mountain Care is sustainable." This is the lynchpin of the whole mechanism: As Governor Shumlin has said, unless his planners can figure out how to get costs under control, he will "pick up our marbles and go home."

To date, there is no evidence that Vermont can get health care costs under control. Over the past three years, the annual increase in hospital budgets-the engine for the cost increases-have dropped to the low to mid 4 percent range. The reason for that is almost certainly the 2008 recession that reduced demand for health care over the following few years.

The budgets that took effect on Oct. 1, however, went up by 7.1 percent, more than three times the inflation rate in the underlying economy. This budget cycle was the maiden voyage of the Green Mountain Care Board as the chief regulator of the system, and the results could serve as a good, textbook definition for an unsustainable increase.

Regardless of any textbook, state law says that cost containment efforts must "result in a reduction in the rate of growth of Vermont's per capita health care spending. The Shumlin  administration could reach this goal, but it certainly hasn't reached it, yet.

-- The Board must demonstrate that a single payer system "will not have a negative aggregate impact on Vermont's economy." It would be a mistake to see this provision as just some feel-good language to quiet the concerns by skeptics about the program.

If there is one thing that Governor Shumlin cares more about than single payer, it is the vitality of the overall state economy. And one of the most crucial of the many unanswered questions about single payer is how any payroll tax levied as part of the financing mechanism will affect big employers like IBM, who act as their own health insurers, a privilege enshrined in federal law.

In the specific case of IBM, Shumlin has already told its leadership that his single payer plan will not foreclose the company's ability to run its own program. The dilemma lies in the fact that federal law precludes a state from enacting a tax and then picking and choosing among who has to pay it. So, would IBM, or any other major employer, have to both pay for its own health care and pay the payroll tax?

The Shumlin planners may find a way through this labyrinth, but they haven't found it, yet. IBM, arguably the most important private employer in Vermont, could leave if the tax environment became intolerable, and there is no way Shumlin is going to take a chance on that eventuality.

The overly nonchalant way that Shumlin and his supporters talk about single payer as a done deal should not, however, be allowed to mask the absolutely terrific start they have gotten on the problem. The Green Mountain Care Board booted their first ground ball, but as a body it is orders-of-magnitude more capable than its predecessors, the Hospital Data Council and the Public Oversight Commission.   The Board has also done outstanding work in building the necessary infrastructure for reorganizing the delivery system and changing its reimbursement mechanism so as to make it possible to finally get costs truly under control. No other state has gotten as far down this road as Vermont.

Ironically, the one statement by Brock that could turn out to be true is that a single payer could require the largest tax increase in Vermont's history. If Vermont could meet the cost containment requirements established in state law, that tax increase would save the people of the state huge amounts of money.

No one, including Shumlin, has any idea how much such a tax increase would be four or five years from now. But health care cost increases are an enormous burden now, and getting them under control would be a huge financial windfall for the state.   

To say that the problem is not yet solved, therefore, is not to denigrate the progress that has been made and the favorable prognosis that it deserves.

The biggest failure so far has been the failure of the political campaign to enlighten anybody on the realities that attend an enormously difficult job.

Editor's note: Hamilton Davis chaired the Data Council that he refers to in this column in the late 1980s.

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