Gov. Peter Shumlin wants the Legislature to approve a $90 million payroll tax on Vermont businesses. But lawmakers are reluctant, to say the least. And the governor’s proposal rests largely in the hands of an unconventional bureaucrat who will have to convince legislators that the money will be put to good use.
Al Gobeille is the chairman of the Green Mountain Care Board, and his five-person panel already has wide-ranging authority over the state’s health care system. But Peter Shumlin now wants to endow the group with even broader policy powers.
Gobeille joked about the ever-expanding scope of his job duties during an appearance Wednesday morning before the House Committee on Health Care.
“I would just like to publicly thank the governor for keeping my life very interesting, and never really allowing anything to get boring,” Gobeille said.
Gobeille comes off like a friendly, low-pressure salesman – a trait perhaps owing to his private sector career in the hospitality business.
Lawmakers trust Gobeille's expertise, perhaps more so than the governor's promises. So they’re eager to get his take on Shumlin’s latest big health care idea. And on that front, Gobeille sought to make one thing clear from the outset.
“Understand it’s the governor’s proposal. I’m not here to sell it,” Gobeille told lawmakers. “There’s parts of the governor’s proposal that I haven’t studied yet.”
Shumlin wants to create a new payroll tax that would generate $90 million, and then use that money to increase the amount doctors are paid to care for Medicaid patients. The proposal has one key benefit – the $90 million in state money would draw down an additional $100 million in federal matching money in the process.
If Medicaid reimbursements go up, according to Shumlin, then hospitals will be able to cut the rates they charge private insurers, like Blue Cross Blue Shield. And the businesses putting up the $90 million to fund the ploy should see every dollar returned to them in the form of lower private insurance rates.
The fate of the governor's payroll tax proposal rests on that promise of a payback.
Gobeille says that, in theory at least, the concept makes sense. And he says boosting Medicaid reimbursements should relieve pressure on private insurance rates.
“It is possible? Yes. Is it really hard and complicated? Yes. Do I make guarantees? No. That’s not my style,” he said.
Gobeille says he isn’t offering any opinions about the merits of the particular revenue source Shumlin has proposed using to generate the new money.
Gobeille says hospitals and insurance carriers are wholly on board with the plan, and have committed to making sure that increases in rates for Medicaid services will be offset by commensurate reductions in prices charged to private insurance.
But he cautions that the Green Mountain Care Board exerts power over only a portion of the health care market.
“This is about thousands, if not millions, of individual pricing transactions that occur at the working surface. It is not about saying, ‘well, we’ll take $100 million from this payer and give $100 million to this payer.’ It doesn’t work like that,” Gobeille says.
John Franco, a health care policy analyst formerly contracted by the Shumlin administration, told members of the House Committee on Ways and Means that the governor’s policy has some severe flaws.
The Green Mountain Care Board, he says, has no authority over health care costs the hundreds of thousands of Vermonters covered either by self-insured companies, out-of-state companies, or the federal government.
And he says that 35 percent of hospital costs incurred by residents are done so at hospitals outside the state of Vermont.
Given the fact that so much health care activity occurs outside the purview of the Green Mountain Care Board, Franco says it’s doubtful that the board can exert its influence in ways that will ensure businesses recoup their $90 million in the form of reduced insurance rates.
“You’ve got all these leaks in the bucket, and that then becomes a very clunky and inefficient way of getting the savings to Vermonters,” Franco said.
Shumlin’s plan would raise a total of $190 million annually, and he proposes using $140 million of that money to reduce the Medicaid cost shift.
The cost shift has grown dramatically in recent years, up to more than $400 million this year from about $150 million less than a decade ago. Don George, CEO of Blue Cross Blue Shield of Vermont, says that cost shift is the primary reason that increases in insurance premiums are rising at a faster clip than increases in overall health care spending – the government is covering the cost of its health care programs, and so hospitals and other providers are jacking up rates on commercial insurers to cover the gap.
Administration officials say the $140 million being put into curbing the cost shift won’t deliver dollar-for-dollar decreases in private insurance rates – mainly for the reasons Gobeille and Franco outlined Wednesday. But they say the Green Mountain Care Board should definitely be able to use that $140 million to ensure at least $90 million in downward pressure on private rates – thereby returning to businesses, in the aggregate, the money they’re investing in the form of the payroll tax.
The more a company spends on health care today, the more they’d theoretically benefit from the proposal. And companies that don’t offer any health insurance benefits wouldn’t see any return on the .7 percent payroll tax assessment they’d be forced to pay under the governor’s plan.
House Speaker Shap Smith says lawmakers are rightfully skeptical about the governor claims. But he says he’s convinced the state needs to address the issue of paltry Medicaid reimbursement rates, which he says have fallen so low that some doctors won’t even accept Medicaid patients.
“And so if we don’t address the cost shift issue, we can be sure that fewer people will have access to health care, and insurance premiums will go up at a greater rate than they should,” Smith said.
But Smith says he’s less committed to using the payroll tax as a financing mechanism to generate the revenue needed to move forward with the proposal. He says the House is examining other possible sources, including fees on businesses that don’t provide health insurance – known as the Catamount Assessment – and a tax increase on health insurance claims.
