Health care issues stall in Legislature
If you were looking for relief from the Vermont legislature this session from the myriad of health care related costs and related problems, you’ll have to wait until the second half of the biennial in January for any meaningful progress. With the exception of a bill pertaining to Certificates of Need, H-128, in the final stages of passage as VBM went to press, there is little new health care legislation to report.
This year the fledgling legislators and the new administration pushed Act 60 reform and permit reform leaving action on health care for next year. “Not much is happening on the legislative agenda,” said John Hollar a Montpelier attorney and lobbyist for the Coalition for a Tobacco Free Vermont, MVP Health Plan and others.
“This is one of the quietest years in terms of health care policy I’ve seen in last 13 years.”
Ethan Allen Institute head John McClaughry agreed. “My take is that (Governor) Douglas had a scatter shot approach to health in his vision statement. Act 60 and permit reform has so filled up the policy space.”
Also disappointed was Bill Driscoll at Associated Industries of Vermont, the manufacturing association. “There doesn’t appear to be much happening. It’s been the incredible shrinking issue this year.”
Hollar attributes the lack of legislation to “a real feeling out process this year. The parties didn’t pursue agendas except Act 60 and permit reform.” This session, he said has seen, “a real sense of restraint. They are circling to see where the other side is going. No one wants to make a move.” “There’s no consensus on how to address the problems of rising health care costs,” said Hollar. “Politically neither party has been willing to stake out a position.”
According to Hollar, the situation is likely to change next year. “It’s an election year and there is a great deal of concern among employers and individuals so there will be increasing pressure.”
Of concern to employers, and a leading issue with AIV, has been the rising cost of Workers Compensation insurance.
Driscoll, the AIV point man on workers compensation, said financial problems in the insurance industry are partially to blame for the rising costs. After the events of September 11, 2001, as with other sectors of the insurance industry, reinsurance costs rose and the losses from the stock market have hurt the insurers’ bottom line. Insurers pass these losses along to policyholders. “This has aggravated the underlying problem that workers comp can be expensive,” said Driscoll.
Vermont, he said, has particularly high pressure on premiums, due in part to the many claims. “The rules of the game in Vermont lead to a disproportionate pressure on costs,” he said.
Specific to Vermont are the minimum and maximum compensation rates, which expose insurers to what Driscoll termed, “a relatively higher liability than in other states.”
Vermont’s long statute of limitations in filing a claim, he said, “makes it easier to make a claim and not question whether it’s legitimate.” There is an annual COLA for wage replacement benefits in Vermont also affecting rates.
Also pushing rates is the way the state looks at pre-existing conditions aggravated by current work. “It affects the number of claims, and the volume of covering claims, which increases costs of insurance,” said Driscoll. “We need a system that better determines and takes into account what actually caused the complaint.”
While the state has a doctor’s fee schedule that controls costs for workers compensation, there is no hospital fee schedule. AIV would also like to see stronger penalties for fraud and stronger rules for after accident testing for alcohol or drugs.
“We expected more this year (from the legislature) but to be fair there is a lot of bills in the House Commerce Committee to review and the administration was developing its agenda,” said Driscoll. “Workers comp is a politically charged issue that labor is fighting to keep.”
Rising health insurance premiums are on every employer’s mind as well as anyone who pays for health insurance. Would more competition help? “Vermont is a relatively small market with 680,000 people and a barrier for some large national carriers,” said Leigh Tofferi at Blue Cross/Blue Shield of Vermont.
Enough competition exists in the large group market for employers with more than 50 employees it’s the small group market of one to 49 employees and the individual insurance. market where competition is less intense, he explained.
Tofferi cites Blue Cross, Vermont Health Plan (which is -owned by Blue Cross, Fletcher Allen, Dartmouth Hitchcock and Rutland Regional Medical Center) Cigna, and MVP as the major insurance issuers in the large employee market holding 95 percent of the policies. In 2001 there were 26 licensed carriers in the large group market.
The individual market, said Tofferi, is tight unlike the employer market. “Younger people sometimes take the risk and don’t take insurance. The people most likely to look for insurance are those who think they’ll need it and this is a higher risk population.” The small group market has problems, he said, “because it is more costly administratively for an insurance company to deal with a lot of small companies. A company looking to make a profit will probably find more fertile ground in larger states.”
Legislation introduced in the House Commerce Committee, H196 by Rep. Frank Mazur, would modify the system of community rating in individual and small group markets, and allow the insurance department to approve a benefit plan that doesn’t include state mandated benefits which include mental health parity, chiropractic coverage, and contraceptive coverage. This bill was not expected to pass.
Tofferi said there is a perception that more competition among insurance companies will reduce insurance costs. That perception, he said, is inaccurate because it is the cost of services delivered at the provider level causing the high rates. “Whether you have six or 24 companies competing, the amount of money used to pay for health care remains. Competition among the insurers doesn’t reduce the cost of a heart transplant.” He believes competition among providers is the only way to reduce health care costs in a competitive model. The other way, which is somewhat addressed by H-128 as Certificate of Need legislation, is to use state regulation to reduce costs.
According to Tofferi, “competition among insurers doesn’t do anything to reduce health care costs.”
He is not a friend of community rating, touted as a way to lower costs. “Prior to community rating,” said Tofferi, “there were more insurers in the market but many had a small percent of market share and were looking only for the healthy.”
“If you do away with community rating healthier people will see a benefit and the rest of us are worse off,” he predicted.
“The biggest state government issue (in health care) is the cost shift,” said Steve Kimball a Montpelier attorney who lobbies for the state’s hospitals. He said hospital costs for delivering service are relatively low, below unit cost of similar hospitals elsewhere.
“What aggravates people is that they pay high insurance premiums,” he noted. “It doesn’t compute that premiums are high if costs are low.” The problem, he explained, lies with the State of Vermont as the second largest insurance company in the state after the Blues. Vermont covers 130,000 Vermonters in its Medicaid and VHAP programs. These programs, said Kimball, pay on average 82 percent of what it costs the hospitals to deliver the service.
“The reason insurance premiums for business are very high is that with the state insuring such a huge number and not paying what it costs, the hospitals make it up by charging commercial insurers higher fees for the service and the insurers charge a higher premium,” said Kimball. Kimball isn’t ready to condemn the social service system as it exists. “There is no blame here. It’s good social policy to cover poor and lowincome people they need access to health care. It’s an elegant system, but it is a hidden tax on those who pay commercial insurance premiums.”
Included in H 464, the appropriations act for fiscal 2004, Governor Douglas, in April, proposed a mechanism using Medicaid funding waivers to draw down more federal money (the federal government pays 60 percent of Medicaid costs in Vermont) about $13 to $14 million in new federal dollars and use this, in part, to provide a 10 percent increase in the rate the state pays for Medicaid recipients. The state will thus pay about 90 percent of what it costs instead of 82 percent, Kimball explained. “This had not yet passed the legislature as of the writing of this article. H 128, expected to pass, requires creation of a Health Resource Allocation Plan. Kimball called that, “a blueprint for what kinds of health care services should be delivered where.” He said it would determine, for instance, how many MRI’s are to exist in the state. He called it “a capital investment allocation plan.”
Under the terms of the legislation, Commissioner John Crowley at BISHCA has to write the plan by July 1, 2005 and has $300,000 in funding for the two- year study to pay for consultants. The hospitals will pay for the study. “It is designed to provide guidance to hospitals for Certificates Of Need,” said Kimball. “The bill is a planning document.”
Speaking for the Vermont Medical Society, Paul Harrington also sees the need to raise state reimbursements for Medicaid services as a way to lower overall insurance costs. “Vermont Medicaid pays only 54 percent of what Blue Cross/Bluc Shield reimburses demonstrating the under reimbursement by Vermont Medicaid and the resulting cost shift to Vermont’s other insurance companies and thus employers,” he said.
“We are pleased that the House and Senate rejected the administration’s original proposal to charge Medicaid enrollees up to an $850 deductible (Included in the bill for the general budget.)
Instead, both houses proposed that Medicaid beneficiaries pay a premium. “Studies show only one third of the proposed deductibles would have been collected,” said Harrington. “That position would have further reduced physician reimbursement. The premium, collected by the state, places the responsibility for payment and collection where it belongs with the enrollee and the state.”
Harrington supports H-128.
Former Windsor County State Senator Cheryl Rivers now heads the National Legislative Association on Prescription Drug Prices based in Montpelier. The costs of drugs, and their growth as a segment of the overall health care budget, are of concern. Vermont, she acknowledged, is taking steps to lower costs.
“State government is trying to take a more aggressive stance to negotiating for price in its Medicaid, Vermont Health Access Plan, and Vscript (elderly) plans, she said.
“Vermont has been smarter than other states in the way it administers state drug assistance programs,” said Rivers. “We have one vendor for all our state assistance programs, First Help Services from Virginia.” However, the state could do more, she complained. “We have a separate contract for state employees with Cigna.”
Drug costs are rising 15 to 20 percent per year, she said. However, the latest attempts to control costs, in her opinion, are increasing co-payments and deductibles and shifting costs onto employees.
In 2002 the legislature passed laws that attempted to invite companies to a Pharmacy Best Practices program. Rivers said this program was established “to demonstrate we can move market share and to aggregate purchasing power.” The program is not yet working, she admitted.
While Vermont has joined with Michigan in a buying compact to obtain better drug prices, said Rivers, Michigan may be softening its approach toward tougher negotiations for price. This drawback, she believes, is the result of internal pressure on Michigan from its in-state drug companies. Rivers is disappointed with this biennial session and the Douglas Administration on drug price issues. “I’m critical of the hands off approach. They have not moved aggressively to save money in the state employees contract. They should renegotiate that contract. You could save a minimum of $1 million on drug costs without shifting costs to employees with a better contract.”
Sue Kruthers at the Vermont Chamber of Commerce said the chamber was not focusing on health care issues this year. “There’s nothing regarding health care in the chamber’s top 10 economic initiatives at this time.” She acknowledged “a huge concern about increased health costs from our business members. We all know it’s a problem but don’t know the solution.” Herb Olson, an attorney with BISHCA, said his department “is just getting started in reviewing policies and the new legislation.”
Wait until next year said Hollar. “My sense is next year we will see two starkly different positions. On the right there will be a move for more competition for health insurance in the belief that that will lower premiums. Governor Douglas, John Crowley and Frank Mazur will lead this effort. On the left there will be an organized effort for a single payer approach by lowering administrative costs.”
That effort, he predicted would be led by Vermont doctor Deb Richter who has received funding from billionaire George Soros. Hollar sees support on the Senate Health and Welfare Committee chaired by Senator James Leddy.
Copyright Boutin-McQuiston, Inc. Jun 01, 2003
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