Welcome to "Toward Evidence-Based Health Care Reform," a
periodic e-memo providing facts, figures, examples and analysis
of current issues in health care reform in Vermont. The
memo is written by Jeanne Keller, Keller & Fuller, Inc., and
sponsored by BRS, Inc., a member organization providing a range
of services and support to Vermont's small businesses. For
more about BRS, please visit our website:
LINK
To read and download our comprehensive health care reform
proposal,
click here.
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What's Up, Catamount? Part 2
Governor's Proposal
A few proposals are
surfacing to change the design of Catamount Health,
principally to reduce the cost to the state. Here’s an
analysis of the Governor’s proposal, which has been
introduced as H. ???.
Income Sensitive Deductible
Key features of the proposal:
·
Existing
benefits unchanged, including waiver of cost sharing for
preventive and chronic care
·
Office visit copays increase from $10 to $25
·
Prescription co-pays:
°
Generic –
unchanged at $10
°
Tier 2 –
increase from $30 to $35
°
Tier 3 –
increase from $50 to $55
Deductible changes from $250 for
everyone, to deductible based on household income, as seen
in the chart below:
|
Cohort *
|
Max
Income
|
Monthly participant
Premium
|
Proposed Deductible
|
Deductible as % of Income
|
Max OOP
|
Max OOP as % of Income**
|
|
|
< 150%
|
$16,245
|
$60
|
$250
(unchanged)
|
1.5%
|
$ 800
|
5%
|
|
|
|
|
150-175%
|
$18,953
|
$60
|
$500
|
2.6%
|
$ 1,050
|
6%
|
|
|
176-200%
|
$21,660
|
$65
|
$800
|
3.7%
|
$ 1,350
|
6%
|
|
|
200%-225%
|
$24,368
|
$110
|
3.3%
|
$ 1,350
|
6%
|
|
|
226-250%
|
$27,075
|
$135
|
$1,000
|
3.7%
|
$ 1,550
|
6%
|
|
|
251-275%
|
$29,783
|
$160
|
3.4%
|
$ 1,550
|
5%
|
|
|
276-300%
|
$32,490
|
$185
|
3.1%
|
$ 1,550
|
5%
|
|
|
Over 300%
|
$32,490++
|
$393
|
$1,250
|
3.1% at low end, decreases as income increases
|
$ 1,550
|
5% at low end, decreases as income increases
|
|
|
* % of fed pov line
|
|
|
** Max Out of Pocket - the maximum of deductible
and all copayments, after which insurance starts
paying 100% of costs
|
|
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This proposal allow includes allowing age-rating (+-
20% rate bands) for enrollees who do not
receive premium assistance.
The
estimated potential state savings: $2.27 million, by
reducing the total premium for Catamount, thus
reducing the amount of total state subsidies.
As everyone knows, increasing the
deductible decreases premium, whether in health,
auto or home insurance. This proposal garners
savings from raising deductibles, but tempers the
impact by making the deductible income-sensitive. As
the chart above shows, in no case would the proposed
deductible be more than 3.7% of an individual’s
income. Even more significantly, as the chart shows,
even with higher deductibles and copayments, the
maximum out-of-pocket expenditure (the most a person
would pay if they “max out” their deductible and
copayments) is never more than 6% of income.
This means that Catamount Health,
even with the scaled deductible, would provide
households with the security and protection of
never paying more than 6% of income toward health
care costs, even in the worst case. Because of
Catamount Health, we can be assured that
participating households will not be bankrupted by
health care costs. (Isn’t that the goal?)
A second part of the proposal
allows age-rating of the Catamount Health plan for
those not receiving subsidies. This means that
younger individuals may enjoy significantly lower
premiums than are currently available. Because of
the high proportion of uninsured who are between
18-32 years old, who frequently cite cost as a
deterrent to enrollment, this seems a reasonable
proposal. However, because the age rating will apply
only to the cohort not receiving subsidies
(over 300% of poverty, or more than $32,490/year in
income), it’s not clear how much this will help
younger folks, unless their incomes are already
fairly high. This proposal will increase premiums to
older, higher-income, uninsured Vermonters.
A caveat about this proposal,
however: the projected savings to the state are
predicated on a reduction in the current full
premium ($393), which was established in
mid-2007. The premium was not increased on the first
enrollment anniversary in November 2008. Carriers
have not filed trends or other claims experience on
Catamount Health that would allow a valid projection
of what the cost (full premium) will be starting in
July 2009, or at the second anniversary in November
2009. Suffice to say that in the intervening 18
months since the $393 premium was established, the
participating carriers have raised premiums in their
private sector plans by at least 15% and often more.
It’s entirely unreasonable to assume that Catamount
Health will continue to cost $393/PMPM through the
next fiscal year.
Therefore, unless participant
premiums are also raised, the entire
incremental cost, when new carrier premiums are
implemented, will be borne by the state. (For
example, the proposal assumes that the monthly full
cost at the <150% income level remains the same -
$60/mo. However, if the premium actually increases
by 15% --which experience in our systems says it
should, at least)-- from $393 to $452, with the
lowest individual premium frozen at $60, the state
will have to pay the entire increase of $59 PMPM for
those individuals. According to the January report
on Catamount Health, there were 977 individuals at
that premium level. 977 * $59/mo * 12 mos = annual
additional cost to state of $692,000, just for those
individuals.)
This reform proposal should be
re-priced based on what the expected new full
premium will be for Catamount health in FY2010. If
we don’t project costs accurately, or if the state
refuses to allow carriers to raise premiums to
support the actual cost of Catamount Health plans,
then Catamount, like Medicaid and VHAP, will become
a cost-shifter to private sector plans, because we
will be internally subsidizing our carriers for
their losses on Catamount.
The proposed change to deductibles
is important and will reduce the cost of the plan,
but we need to see accurate predictions of the
FY2010 cost to the state of Catamount, to determine
whether this change alone will make Catamount
sustainable in FY2010.
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Watch for our next bulletins for
analysis of more Catamount proposals.
We’re the ones having the recession
In one of his first reports to the Legislature, consultant
Ken Thorpe explained that when health care and health
insurance costs go up, the first to suffer are low wage
workers. Increased health care costs to employers result ---
one way or another – in depressed wages, either because more
cost sharing is required, or wages stall while money is put
into the insurance. (It doesn’t matter, said Thorpe, whether
employers pay through premiums or a payroll tax; wages are
hit.)
When wages are depressed, the state collects less revenue.
Therefore, to counter the recession the legislature should
not just cut the state’s budget, they should not be
adding more costs to health insurance.
The folks having the recession that is depressing state
revenues are the same folks who can’t afford higher health
insurance costs … Working Employees (“we”),
sole proprietors, local governments and the businesses that
create jobs in Vermont.
The money the
insurers have is OUR money, paid to them for health
insurance. They have no place else to get more money. If
insurance costs are driven up by legislative action, we pay
for it, not the insurers.
So, while the Governor and legislature say “everything is on
the table” for expenditure cuts, let’s make sure the
off-state-budget expenditures (insurance mandates, new
taxes, assessments and cost shifting) are also on the table.
-
$27 million tax
on health insurance claims to give grants to doctors for
computers, the “VITL tax,” is still in the proposed
state budget
-
$8-$16 million
short-changing of hospitals on their provider tax
rebate, which will become another cost shift through
higher hospital charges to private insurance, is still
in the budget
-
Capping
personal co-pays at $25 for mammograms, when the
provider charges to insurance range from $83 to $335
around the state.
-
Mandating that
insurers pony up a couple of million dollars of our
insurance money toward the cost of the Blueprint’s
Medical Home Pilot. (Now attached to S. 283 by House
Health.)
The Senate Health
and Welfare committee is listening: on Wednesday they
removed the mandate that employers have to insure divorced
spouses and adult non-dependent children of employees, two
categories already eligible for Catamount Health. We applaud
them for their courage and prudence.
The greatest contribution the General Assembly can make is
to exercise the same amount of fiscal responsibility with
our insurance money as they are with their own shortfall….
After all, we are the ones out here having that recession,
and the last thing we need is increased health insurance
premiums from the Vermont Legislature.
Back to Top
We can’t afford any more savings . . .
Health care “reforms” this year are packaged in terms of
“savings.” And if you don’t have the time or know-how to analyze
and dispute the claims of “savings,” it’s hard to vote against
them. To further confuse things, the changes are now called
“fees,” “eligibility expansions,” “investments,” and “system
costs” instead of “mandates” and “taxes.” We are being told they
will generate “savings” far in excess of the cost of any
mandate, tax, or expansion.
So far, the following bills have passed at least one chamber in
the General Assembly, with a promise of “savings” to the people
who will pay for them. But there is only one group
paying for all this: anyone fortunate enough to still
have private health insurance. And the savings? You do
the math . . .
-
Mandated coverage
of adult non-dependent children and divorced spouses (cost:
$16-$32 million) Catamount Health advocates are saying they
can’t get the 18-24 year olds to sign up for Catamount;
Mandating their coverage under the parent’s
employer-sponsored plan will get us closer to the
legislature’s target of “96% insured.” Catamount enrollment
is five months old – maybe we’re giving up on Catamount too
soon (because the mandate is so much easier?) The House
committee said this mandate will cost “only 1-2% of
premiums.” In real numbers, that means a $16-$32
million increase in premiums in one year, which will
compound at health care inflation year after year. We’ve
been told there isn’t a cost because we’ll “save” --- by not
having those kids walk into the hospital uninsured. Well,
premiums WILL go up for sure, but if those newly insured
kids go to the hospital, how exactly do we get our “savings”
back? The cost shift is built into the hospitals’ rates ---
there’s no law that reduces hospital rates just because
people are now enrolled in Catamount or other insurance. The
cost shift continues, AND we pay higher premiums. What
savings?
-
VITL tax on private insurance (cost: $27 million over 10
years)
Without any study of whether taxing private insurance was
the fairest or best way to fund electronic medical records
for Vermont doctors, and without a firm legal opinion that
it can be successfully defended in federal court (“the ERISA
problem”), the House passed a tax on private health
insurance to create a fund to pay 75% of the cost of
computerized medical records for doctors. Spreadsheets
presented hundreds of millions in “savings” that justified
taxing private insurance. The problem is that the report the
committee’s “savings” figures came (“Bending the Curve”)
from says, on p. 13: “Net savings would accrue by year 10
to all except private payers, which would realize
cumulative savings in following years.” We suggest you
read that sentence again. In other words, the study used to
justify this insurance tax itself points out that
private insurance won’t see savings for at least ten years,
which is the lifetime of this tax on private insurance.
¨
Did anyone actually read the study they are
quoting to justify taxing private insurance based on savings?
What other claims of insurance savings were flat-out wrong? For
example, the other “study” used to justify a tax on private
insurance supposedly says that physicians realize only 11% of
savings. This “study” is noted in VITL’s State HIT Plan, p. 73.
The “11%” figure is footnoted, and that footnote leads you to a
New York Times article that quotes a doctor saying his group did
a study. What study and what else does that study say? Is
this any way to justify a $27 million tax?
(And the New York Times article begins, ironically enough:
“Saving money can be expensive.”)
¨
Mammogram copay capped at $25 (cost
impact yet unknown) Because private insurance will save so
much for early detection and treatment of breast cancer, this
bill caps the copayment for mammograms at $25. Insurance will
have to pay the balance, which varies significantly around the
state, from a low of $83 at Copley and Rutland, to a high of
$339 at Fletcher Allen.
While copayments may have been an obstacle for the women who
testified in support of this bill, it’s not at all apparent that
the increased premium cost for this mandate will be made up for
in savings from earlier detection and treatment, as alleged.
Simply lowering the copay doesn’t make women get mammograms, and
doesn’t mean a cancer will be detected early enough or is
treatable. What evidence was provided, other than anecdotal
testimony of specific cases, that private insurance will save
more than this mandate will cost? Premiums WILL go up, but we
can’t be sure of any savings. Expanded eligibility for Ladies
First, a combined outreach, education and screening campaign,
makes so much more sense, and might actually result in savings,
because more women will actually get mammograms.
And some members of the House and Senate members want to add
colonoscopy to the $25 cap mandate, with hospital charges
varying even more: $858 at Rutland to $3402 at Gifford.
Maybe if the hospital charge were also mandatorily capped,
the private insurance might realize savings? Why
should only the privately insured bear the cost of this societal
good?
¨
Provider Tax Change (cost: $16 million)
VT Hospitals are taxed to draw down federal matching dollars,
and up to now have been “made whole” later for the tax. The
budget that passed the House includes the Governor’s proposal to
short-change the payback by $16 million. The “savings” from not
making the hospitals whole goes somewhere else in state
government, while the shortfall will be made up in higher
charges to private insurance. Yes, increased cost shift, no
savings.
¨
Medical Home Pilot (cost impact yet unknown)
House Health wants to mandate that private insurance plans
conduct pilot projects for the Blueprint for Health’s vision of
“medical homes” for patients. The pilot projects (yes,
pilots –untested redesign of the delivery system)
would be conducted for the Blueprint, a state government
initiative, and the mandated participation, including a mandate
of partial financing, is the legislature’s idea. At this point,
the carriers have been shown no evidence whatsoever of a
positive return on investment. Their costs (personnel, payments
to providers, other costs of ramping up, operating and
evaluating these pilots for the Blueprint) will be charged to us
in higher premiums, and maybe someday, if this model “works”
and is universally implemented (rather than one of the other
pilots the legislature is directing) there might be savings.
¨
“Normal” Medicaid cost shift (cost $90+
million) As far as anyone can tell, the House’s budget for
Medicaid does not reduce the cost shift, and may not even keep
up with inflation; meaning: more cost shift. But we did save in
taxes!
Let’s not forget past legislation that was supposed to “save”
money for us:
¨
The 2006 Employer Assessment that funds Catamount
Health, to reduce the cost shift from the uninsured. (Except
there’s no mandatory reduction in the “uninsured cost shift”
when people enroll in CH)
¨
Mandated coverage of nutrition education and
counseling more than ten years ago, which was supposed to save
us millions from a potential obesity and diabetes epidemic.
¨
The Blueprint for Health, which was going to
produce $30 million in savings for Vermont’s Medicaid program by
2010, which would keep Catamount Health from being in deficit
that year (except now we can’t get those savings without buying
computerized medical records for the doctors, etc.)
This isn’t to say that any of these initiatives is a bad idea.
However, if the only possible funding source is cost
shifting and taxes on private insurance, maybe we should
evaluate whether we can truly afford to do all of these good
things. If the legislature can’t convince the voters these are
worth new income taxes, why does the legislature think that
private insurance can carry these new costs?
Please! We can’t afford any more savings.
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