Rep. Adam Greshin organizing the lift line at Sugarbush Resort
House member Adam Greshin (I-Warren) is an avid skier and a partner in Mad River Valley's Sugarbush Resort. In a Statehouse committee meeting last week, he discussed lift-ticket prices.
Suppose, he said, you are between 19 and 65 years old and want to ski there on a Saturday. How much will you dole out for a lift ticket? Ninety-one dollars. But if you are a child 6 or under, you ski for free.
Someone is paying for those "free" tickets for kids — who ride the lifts and benefit from snowmaking just as paying customers do. It's the adults paying $91 to ride.
You could call it a cost shift, and it has a purpose in the ski industry, Greshin noted. Letting young kids ski free — and offering adolescents a $20 discount — is a strategy to get the next generation hooked on the slopes.
A similar cost shift happens in the health care arena — and Gov. Peter Shumlin aims to correct it. Who's skiing for less on that mountain? Government.
Medicaid, a health program for low-income people jointly funded with state and federal dollars, currently pays less than what private insurers do for medical services. And Medicare, the federal program covering health care for the 65 and above set, also skis on the cheap.
The Green Mountain Care Board computes the extent of the cost shift annually. For 2015, the board pegs Medicaid underpayments to hospitals and doctors at $150 million. For Medicare, the number is $175 million.
The first tricky maneuver on the cost-shift trail comes when hospitals look to Blue Cross Blue Shield, MVP Health Care and other insurers to make up the difference.
At Rutland Regional Medical Center, for example, 70 percent of the patients are on Medicaid or Medicare, CEO Tom Huebner said. "Both pay us less than it costs us to serve our patients," he said. "That causes us to charge our patients who do have insurance more than it costs," Huebner said. If Medicare and Medicaid paid what the care cost, he said, "We could reduce our price to everyone else by one-third."
Doctors in private practice have little leverage to negotiate fees with insurers, Paul Harrington, executive vice president of the Vermont Medical Society, told the House Ways and Means Committee. They often have to swallow the loss or limit how many patients on government programs they see.
Back on the slippery slope: Private insurance companies pass higher costs along to their customers — businesses and individuals.
In his January 15 budget address, Shumlin called the cost shift a hidden tax that was increasing at an astonishing rate. The governor, who recently shelved ambitious plans for single-payer care because he deemed it too expensive, declared 2015 the year to start fixing this problem.
But Shumlin's remedy would address only Medicaid's underpayment, not Medicare's, and be limited to outpatient hospital expenses and professional medical services only. It would increase Medicaid reimbursements only to levels close to those of Medicare, which are still less than what private insurers pay.
And it would cost — a lot. To fund it, Shumlin is proposing a 0.7 percent payroll tax that businesses would start paying in December. The tax would raise $41 million in the first six months of 2016 — the second half of the state's next budget year and the one that lawmakers and the administration are planning now.
In his speech, Shumlin trumpeted the fact that the state could use the $41 million as leverage to draw down roughly the same amount in matching federal funds to help pay for his total health care initiative. His six-month plan calls for spending $55 million for Medicaid, with $25 million going to raise reimbursement rates and $30 million to cover 20,000 new Medicaid enrollees.
From the remaining dollars, Shumlin wants to earmark $5.7 million to boost reimbursement for providers participating in the Blueprint for Health, a program that uses a new pay structure to promote preventive care and disease management. He'd also designate $5.6 million for mental health agencies such as the Howard Center, $2 million to help more people cover their out-of-pocket insurance costs, and the balance to nursing homes, home health services, and to the Green Mountain Care Board and the tax department for some expanded responsibilities.
Shumlin — and the staff he has busily promoting the plan — stresses that business' tax bills would be offset by decreases in insurance premiums for companies that offer insurance to their workers.
When Rep. Doug Gage (R-Rutland) suggested the payroll tax would require the City of Rutland to cut at least one employee, Shumlin's health reform director Lawrence Miller countered, "That is only looking at one side of the equation. You would see a corresponding reduction in premiums."
Despite these assurances, Cathy Davis, vice president for strategy and public affairs at the Lake Champlain Regional Chamber of Commerce, voiced the split feelings many businesses have about the governor's plan. "We obviously believe it addresses the cost shift," Davis said. "We just aren't sure the payroll tax is the way to do it."
The proposed tax makes many in the business sector nervous because it would open a new funding door. Even a small rate generates millions, which might tempt lawmakers to increase the amount in the future, Davis said.
"It is the proverbial camel's nose under the tent," agreed Greshin. He argued the 0.7 percent rate "is just too tempting to raise."
For Sugarbush, which Greshin described as a midsize company, the proposed tax would cost about $77,000 a year.
Greshin suggested there were other ways to raise the money, such as eliminating tax exemptions, but wasn't ready to get specific.
Darcie Johnston, a Republican political operative and founder of Vermonters for Health Care Freedom, worries about Vermont becoming unattractive to new businesses as the only state with a payroll tax for health care. "We talk about the economic harm the cost shift causes, but what about the economic harm of a payroll tax?" Johnston asked.
House Speaker Shap Smith (D-Morristown) dismissed some of the criticism, noting that the cost shift has been a priority for Republicans and business leaders for years. "Do they really want to do something or just complain?" Smith said.
Still, the Democrat-led House and Senate are expected to ask plenty of questions about the Democratic governor's cost-shift plan.
Smith offered a couple of his questions, starting with determining the impact of the cost shift on insurance premiums now. "What does it mean to a family of four? Five hundred dollars? One thousand dollars?" Smith asked. He also wants to know how the legislature will know that the money put into the Medicaid side of the equation will reduce insurance costs on the other side, a question that Senate President Pro Tempore John Cambell (D-Windsor) echoed. "If we can't get solid assurance that will happen, I don't see how you raise the money," Smith said.
The House Ways and Means Committee spent a recent day trying to follow the new payroll tax-generated money to its proposed destination: personal and business bank accounts.
"We have agreed that we aren't expecting it to be a net increase to hospitals," Bea Grause, president of the Vermont Association of Hospitals and Health Systems, told the group.
"How are people reassured there will be no net increase in hospital budgets?" Ways and Means Chair Janet Ancel (D-Calais) pressed.
"I feel confident we would be able to demonstrate that," Grause replied.
The Shumlin administration argues that the Green Mountain Care Board has the legal authority to make sure hospitals pass along to insurers any uptick in revenues they see from higher Medicaid payments. Susan Gretkowski, senior government affairs strategist with MVP Health Care, acknowledged the board's jurisdiction over hospital budgets. Still, she questioned the board's ability to ensure that private physician practices also pass along the benefit to insurers.
Gage, a member of the House Health Care Committee, remains a skeptic about the proposal. "There is no saying the rate would come down to the proper amount," he said. "I don't see a mechanism that would truly do that. I know the taxes are real. I don't know the savings are real."
House Health Care Chair Bill Lippert (D-Hinesburg) plans a thorough vetting of the governor's plan, but also wants the committee to weigh options. He has scheduled a joint meeting with the Senate Health and Welfare Committee on January 29 to hear alternative ways the state could move forward with health reform now that the governor has shelved single-payer.
Dr. Deb Richter, an advocate for a government-financed health care system, will pitch her idea to give all Vermonters free primary care. "Back of the napkin, we would need about $180 million," she said. "You could do this for a less-than-1.5 percent payroll tax." Health insurance premiums would decrease, she contends, because no one would need coverage for primary care.
Peter Sterling, executive director of the Vermont Campaign for Health Care Security, wants to help more middle-income Vermonters cover their out-of-pocket health insurance costs. He argues that the governor's $2 million cost-sharing plan would still mean a person with a $35,000 annual income could spend as much as $5,100 on health care costs in a year. "That's insanely high," Sterling said.
Sterling will also push a plan to fast-track enrollment of 6,400 Vermonters who are without insurance but eligible for Medicaid, and he has a strategy to find them.
Rep. Paul Poirier (I-Barre) has two ideas he will share with the House Health Care Committee. Like Sterling, he wants to help more people pay for their health insurance. He would use money raised by a new tax on sugary beverages to boost assistance. He also wants to revive a 2009 proposal to authorize the state to set up an insurance plan — a public option — to compete with private companies on the internet-based marketplace known as Vermont Health Connect. It would cover public employees such as state workers and teachers. Cost-sharing subsidies funded by the state would be offered only through the state plan.
Legislative leaders say health reform remains a priority even though the governor pulled the plug on single-payer. And they agree with Shumlin's former secretary of administration Jeb Spaulding, who declared the cost-shift proposal "a big deal."
"It is," Lippert said. And given the chronic cries about the need for state government to do something about the cost shift — to even out those lift-ticket prices, so to speak — he added, "If there is a decision not to do it, that is a big deal, too."
The original print version of this article was headlined "Lawmakers Traverse Shumlin's Health-Proposal Trail"