By Emma Lamberton | Vermont Watchdog
Vermont is undergoing dramatic health care change in the name of affordability, but critics say the high number of individuals drawing upon subsidies is making health care unaffordable for paying customers.
In his June Vermont Health Connect status update, Health Care Reform Chief Lawrence Miller reported that, between Medicaid, Dr. Dynasaur, and premium assistance, “nearly nine out of 10 individual customers receive financial help to make health coverage more affordable.”
But John McClaughry, vice president of the Ethan Allen Institute, said Miller’s talk of affordability is a matter of perspective.
“It’s affordable for the person that’s being treated because someone else is picking up the tab,” McClaughry said. “You can make it affordable for everyone if you have a zillion dollar fund to pay for subsidies.”
This year, nearly two out of three Vermonters on private health plans qualify for federal Advanced Premium Tax Credits, while 55 percent qualify for Vermont Premium Assistance and cost-sharing reductions. The money comes from additional taxes imposed on individuals and businesses.
Vermont currently has the second-lowest uninsured rate in the nation, but not because of in-state affordable health care. The majority of Vermont’s population is either below the national poverty median and qualifies for Medicaid, or is old enough to qualify for Medicare.
The federal programs operate at the detriment of private insurance companies. Since Medicare and Medicaid underpay for health care services, commercial insurers have to pick up the tab and recoup their losses by charging more from paying customers.
“Right now we have a system where private insurance has to pay roughly 130 percent of the cost, and Medicare pays maybe 90 percent, and Medicaid pays about 50 percent,” McClaughry said. “This is the famous cost-shift by which private premiums are essentially taxed to pay for public programs, which is a red flag right there, because it means the programs aren’t self-financing.”
Cory Gustafson, director of government and public relations for Blue Cross Blue Shield of Vermont, says the company is seeing a big difference between government payments and the actual cost of care.
“Increases in health care costs … (are) down to the 3 percent range, but that doesn’t always translate into 3 percent trend growth for BCBS customers,” Gustafson told Vermont Watchdog.
“If Medicaid increases by zero percent, all the increased costs the hospitals have been approved for, they come to the commercial insurers to pick up the difference,” he said. “That’s the payment differential in the annual cost-shifting that goes on. That cost-shifting, year after year, gets frozen and is increased incrementally. At this point, we have a pretty big differential in terms of what each contributes to the system versus the cost of the care being provided.”
McClaughry, a former state senator, said Vermont had 17 different private insurance providers simultaneously. “The only other payer of any size (to make up cost differentials) is private insurance companies, of which we have two left,” he said.
State Rep. Anne Donahue, R-Northfield, said the low number of private insurers in Vermont makes the entire health care system vulnerable because it’s theoretically possible that MVP or Blue Cross could leave the state.
“I do worry about it. I think that’s always been one of the original concerns,” she said.
Gustafson said Blue Cross has no intention of pulling out of Vermont, even though the company’s future is tied to the state’s troubled exchange, Vermont Health Connect. Health officials are rushing to fix a range of problems with the online exchange before open enrollment. In addition, the exchange is estimated to cost $200 million to set up, and $51 million to operate annually.
Donahue said VHC’s ongoing costs and glitches are personally troubling.
“It’s very disturbing to not have a handle on that yet,” she said.
Contact Emma Lamberton at [email protected]