The Green Mountain Care Board is moving steadily toward establishment of a modestly credible budget inflation limit for the Vermont’s 14 hospitals for the coming fiscal year, a performance that would keep Gov. Peter Shumlin’s health reform initiative on track. But some troubling portents have showed up in the process so far.
The most important of these portents is the hostile response of the hospitals to what is actually a very generous budget target-a 4 percent increase in the 2014 figure over the current year’s tally, twice the underlying rate of inflation in the economy. That would allow $85 million in new money in fiscal 2014, which would come on to of the $141 million in new money in the current fiscal year.
The increase over the current and next year’s budget would be 11.1 percent, nearly three times the rate of inflation. The importance of getting this trend under control lies not only in the cost it extracts from Vermonters, but in the fact that Gov. Shumlin’s reform initiative cannot survive without it. The governor certainly knows that. "If we can’t get costs under control," he has said, "we’ll pick up our marbles and go home.
The second portent consists in some signs of a 3-2 split on the five-member board over how hard to push the hospital system on containing costs. At a minor level, the disagreements in tone over the regulatory posture of the board is manageable, but if it persists it could poison the political environment for Shumlin’s single payer plan. And there has already been one case-the addition of dental benefits to the defined benefits package-that could have blown an unmanageable hole in Shumlin’s 2014 budget. The vote against that was narrow, 3-2, on the five-member board.
First the money. You can’t follow the money trail without looking at the recent budget history. In brief, after the decade 2000 to 2009 when every hospital doubled its budget, the legislature ordered caps of 4.5 percent and 4.0 for fiscal years 2011 and 2012. They also provided, however, for so-called off-ramps or exemptions for such items as the spending to advance reform, for hospitals to purchase doctor practices and a few others. The budgets in those years were down significantly, roughly in line with the legislature’s mandate.
The Green Mountain Care board took full responsibility for the process with the 2013 budget and set a cap of 3.75 percent, with the same off ramps. This time, however, the hospitals loaded up on exemptions to the tune of $86 million, more than half the total increase of $141 million. That amounted to a 7.1 percent jump, nearly three times the rate of inflation in the economy. That result not only ignored the legislature’s order in Act 48 to control health care costs, it thumbed its nose at it…
On Thursday, the board will formally set the budget target for fiscal year 2014, which begins Oct. 1 of this year. According to the board’s consultant, Vermonters can afford to pay about $63 million in new money in the fiscal year 2014, which begins Oct. 1. The consultant, Bob Murray of Maryland, told the board that the best thing they could do for health care reform would be to set the target at that level and stick to it, with no exemptions.
In fact, the board didn’t do that. First they added one percent to the target for health care reform. That brought the $63 million to $85 million, a 30 percent increase.
Moreover, the board has basically decided to take the purchase of doctor practices by hospitals out of the budget calculations entirely, a move that could increase actual spending even more. In the current year, Vermont’s hospitals are spending $86 million in new money under the earlier exemptions-to-the-budget policy. Of that amount $36 million was for doctor purchases.
The rationale for that is the fact that there are two acute care cost centers in the state. The largest is the budget for the 14 hospitals, plus 60 percent of the working doctors in the state; that budget is under the control of the GMC board. The other 40 percent of the doctors, however, are not regulated by the board, but they represent an important cost to Vermonters.
If you move a doctor practice from the unregulated side to a hospital, then it adds to the hospital budget, but in theory at least it can reduce the total cost for the unregulated doctors. In a perfect world, that would be a wash for Vermonters. The board at its last meeting decided to try to do that, while acknowledging that it will be difficult to manage.
Nevertheless, it opens up a route for the hospitals to ensure that their communities have a sufficient supply of doctors to care for the patients that will enter the system.
The net result is that while the board is not guaranteeing any off-ramps, it has provided for most of the money: in the current year’s system budget, health care reform and doctor purchases added to $72 million, which amounts to 84 percent of the current year’s off-ramps. In other words, there is plenty of money under the cap proposed by the board. It is not very close to sustainable, but it is a respectable move.
The hospitals are having none of it.
Bea Grouse, the president of the Vermont Hospitals and Health Systems wrote in a letter to the board that its earlier position called for taking an axe to hospital budgets, a move that she said would "endanger the ability of the hospitals to fulfill their missions."
That kind of comment is very close to "Your money or your life," the implicit mantra that has underlain the health care cost issue in the U.S. for last 40 years. The Vermont hospitals, which also employ 60 percent of Vermonters doctors, in fact, hold Vermonters health and in many cases their lives in their hands. The letter was written when the proposed target was three percent, but when the expanded proposal was laid out last week she didn’t give an inch. Her only comment was to oppose the plan to open a separate route to paying for physician transfers.
The board should not hospital revenue targets with the broader health system costs, she said. "Hospitals are one part of a very fragmented system, so if you squeeze the supply side, for spending in hospitals, you may see increased spending elsewhere in the system, and until we have payment reform, that is most likely to happen.
The hospitals have argued that the board should wait until it has put payment reform, and possibly system reorganization in place before cracking down on the budgets and there is some merit in that case. Most policy analysts believe that you need a three-legged stool to get to fully-elaborated health care reform, which would contemplate health care access for everyone at a cost that the public can afford.
Getting to that level will require, in addition to regulation, the replacement of fee-for-service payments to some sort of system where hospitals and doctors take responsibility for the total costs for cohorts of patients as well as an extensive integration of the delivery system itself, with providers tied together sufficiently to permit real economic efficiency as well has significantly enhanced quality.
The problem lies in the fact that neither of these latter two legs is anywhere near operational. There are some pilot payment reform projects on the board’s staff’s drawing board, but it’s impossible to hazard much more than a guess when it might take effect.
The same reading applies to real integration of the delivery system. When he appeared before the board last week, Todd Moore, the president of OneCare, the collaborative effort by Fletcher Allen Health Care and Dartmouth Hitchcock to coordinate care for Vermont’s Medicare population, said that, in effect, that not much has been done yet. "We’re in the getting ready to get ready phase," he told the board.
This situation could smooth out-the hospitals could drop their opposition, or at least modify it and then live with this year’s target, which should not be seriously difficult. Still, their current posture is a reminder that out another three years, hospital and doctor opposition to reform could be enough to sink it, as it has in the past.
And then there is the second portent: a pervasive sense of a potential three-two split on the board, which would be devastating if it persists when the really hard decisions have to be made out around 2016 or 2017 on Shumlin’s project.
There are five members of the Green Mountain Care Board-Anya Rader Wallack, the chair; Dr. Alan Ramsey, a veteran primary care doctor at Fletcher Allen; Con Hogan, a private second CEO who served in the cabinets of both Richard Snelling and Howard Dean; Karen Hein, a physician with a long career in academic medicine and health policy; and Al Gobeille, a Chittenden County businessman.
As chair and the single most important player in the Shumlin reform team, Wallack stays pretty much out the board’s public debates, but she is definitely in charge of the final decisions. She gets strong support from Ramsey and Gobeille, from two perspectives. Ramsey speaks from the perspective of his 30 years experienced as a primary care doctor in Vermont, and he has made it clear that he believes that the board has to insist on tough budget limits for the hospitals and their doctors.
It is a moral responsibility to do that, he tells his colleagues. And he says that Vermont physicians absolutely are ready to change the whole system. "I have talked over the last year to over 1200 of my physician-colleagues all over the state," he said. "And they are ready. I’m very optimistic."
Also pushing for tough performance standards is Al Gobeille, who refers often to the need for solid budget performance in managing his businesses, and while serving as a selectman in Shelburne, where the department heads always say they need more money, whether the town has it or not.
There is far less iron in the views of Karen Hein and Con Hogan. This may be a matter of perception: over hours of discussion you can get a sense of how people view an issue, without necessarily being able to cite a specific instance.
Klein appeared to be alarmed by the fact that the hospitals didn’t like the idea of a fixed target. Maybe the board should look into things like cost-accounting for things that affect the budgets, like the UVM medical school, she says. Con Hogan has talked about slowing down the movement toward sustainability. By themselves, these sentiments don’t mean that much.
But an actual split in one of the earliest important votes the board took may have been a symptom of a more far reaching problem. Klein and Hogan voted to add dental benefits to the common benefit package to be made available on the Vermont exchange beginning next January.
Both had to know that there was no way to get the money for dental care for Vermonters who don’t have it now, but they voted for it anyway.
The board had in hand a letter from Robin Lunge, an attorney and the governor’s director of health care reform, pointing out that "under federal law, the costs of adding services that are not included in the federal categories of coverage under the Essential Health Benefit…must be borne by the state and such categories may not be included in the premium or borne by the consumer."
Wallack, Ramsey and Gobeille voted against it, not because they don’t think dentals services are important, but because there is no chance to get the money to pay for it in 2014. There were several graduated levels of dental care considered by the board last fall; the minimum plan would have cost the state $17 million.
Adding the modest dental benefits to the overall benefit package would have knocked a roughly $60 million hole in Shumlin’s general fund budget, and there is simply no realistic prospect for being able to get that money. The administration is now tied in knots trying to deal with programmatic gaps are just a fraction of the dental numbers.
Wallack, the chair, said that the administration made it clear they were opposed to building the dental costs into the benefits package going live in 2014. Advocating for getting federal support for dental services is perfectly reasonable for most people, including legislators, policy makers, and private citizens, but not for regulators, who can’t say clearly that the money is available.
The 3-2 split on the dental issue will be long forgotten by the time more critical decisions-when, in fact, the legislature would be asked to commit the state to a huge new social program–come before the board, such a split at that point could be devastating.