Reading the tea leaves at the Vermont Exchange

     During the cold war, American intelligence experts would often try to suss out what was going on in the Soviet Union by looking at photographs of Kremlin public events. If Ivan Somebody was in the picture two places from the Russian leader in March and again in May, but was gone in a similar photograph in July, that meant something. Most likely that Ivan was toast.

     In a much more minor way observers of single payer health care reform in Vermont can gain some insight about what is going on inside Governor Peter Shumlin bureaucratic management structure by looking at pictures accompanying stories about the progress of reform.

   Over the last three years, the stories that have come out of the Department of Vermont Health Access, one of three centers of reform activity, have been illustrated by photos of Mark Larson, the commissioner of DVHA, or less often Doug Racine, his boss, who is Secretary of the Agency of Human Services. That was true until the last two weeks.

  Now, the picture accompanying the stories is of Lawrence Miller, the former Secretary of Commerce, who is taking over as the Czar of health care reform in the Shumlin administration:

   July 24, DVAH gets permission to hire 37 new staff members to begin cleaning up the mess over the federally financed health insurance Exchange, a key piece of the reform puzzle. Picture: Lawrence and Stephanie Beck. July 25, Shumlin press conference in Barre. Gets questions about the Exchange mess. Miller on his shoulder. July 28, Miller (pictured) says Vermont will seek extension of federal funds for the Exchange.

   And it isn’t just the pictures. The whole tone of the discussion around reform has changed dramatically.

   On July 10, Doug Racine, the secretary of AHS, gave a presentation to the Green Mountain Care Board, another of the three principal focal points in the reform effort. Al Gobeille, the board chair, had asked the Agency for an update on where the state bureaucracy stood on the various problems facing the Exchange.

   Racine provided a lengthy power point recitation of how the whole thing is structured; he said that DVHA is moving forward on its problems and that they would get solved. There was no hint of a crisis, or indeed anything the board really needed to worry about. There was some apparent unease in questions from the five-member board, but no sense of anything really untoward.  

  Less than two weeks later, the whole atmosphere changed dramatically. Miller went before Mike Fisher’s House health care committee and told them flatly that the whole Exchange effort was a mess and that it would take a huge effort to fix it. Considerable shock attended this information. News headlines spoke of the Exchange issues reaching a “crisis.”

   In fact, there was no new crisis. The whole operation of the Vermont bureaucracy’s management of health care had been a total mess virtually since its inception in 2011, when the newly elected Governor Shumlin took office. The Exchange has never worked properly, and the way that DVHA was headed it never would.

  This failure was costing Vermont millions of dollars in lost federal subsidies, since many Vermont employers didn’t dare to cut their workers loose from company- financed insurance. But that wasn’t the worst of it, by a large margin.

   The problems at the state agency have threatened to sink the whole health care reform itself. 

   The reason: Shumlin can’t get the single payer system he wants unless he can convince the legislature to raise around $2 billion to replace the private premiums that now finance the system of doctors and hospitals that deliver care to the people of the state.

  Doctors and hospitals have provided rhetorical support for the reform effort, but there are huge implicit caveats attached to that support. Doctors and hospitals will have to be confident that whoever manages a whole new management structure for health care.    

   In the simplest terms: The legislature raises two billion dollars and there it sits, in some form of government bucket. A big question: what happens to it? How does it get distributed to the doctors and hospitals who are delivering the care? Who gets paid how much? How does the whole thing work? 

   The answer is still being worked out by the Shumlin team, so we won’t really see it until next winter, but one thing is already clear to all the major and most of the minor players on the field: The money can’t be managed by Doug Racine and Mark Larson. In the starkest terms:  If the doctors and hospitals think that they will be working for DVHA, there will be no health care reform in Vermont.

   So, is that conclusion valid? Call it the competence issue. What is known about it, what is the evidence?

   Few if any of the major players are going to state the case in terms that are this unequivocal. The evidence is nonetheless compelling.

   The attitude of the Shumlin high command is evident by simply looking at the skein of events involving Lawrence Miller.

   Miller is a highly respected businessman who was building a solid reputation in government in his management of the Agency of Commerce and Community Development. Last January, however, Shumlin asked him to help Mark Larson get a grip on the computer problems at the Exchange.

   After spending a couple of months dipping into the DVHA operations in Williston and Winooski while still running his own agency, Miller apparently decided that it would take more than just dipping in because on April 10, Shumlin decreed that Miller would take charge of the whole health care effort for the administration.

   Al Gobeille would continue in charge of the Green Mountain Care Board which has  both regulatory and system design responsibilities. But all health care reform activities in both the Agency of Human Services and in Shumlin’s own office would come under the direct control of Miller.

   It is hard overstate the importance of this, not least because it is unique in Vermont government. To recap, one agency secretary is superimposed on the most important function (health care) in another state agency. Has that ever happened before?

   Not according to Steve Terry, a long time Vermont journalist and utility executive, who has been watching state government closely since the Hoff administration in the mid-1960s. “I’ve never seen anything like that,” he said when asked.

   Add to this Governor Shumlin’s often-repeated comment that “there is no way that Vermont is going to run an insurance company.” And finally, it is important to look at the posture of the “partners”—a group of reform stakeholders that includes the medical society, the hospital association, Vermont Blue Cross, business community and a few others.

   These groups all say they support health care reform, but they are nonetheless very leery about it. For example, last year, the partners contracted a consultant, Avalere Health, to “examine the assumptions” involved in the Shumlin reform effort. The report was superficial and flatly wrong in some of its arguments. Its real importance lay in the simple fact that the partners wanted to send a message that they would oppose a reform plan they thought was damaging to them.

   What all of this adds up to is that the Racine-Larson regime at AHS has lost the confidence of very important player in the game—the reform team operating out of the Governor’s office, and the key stakeholders in the system.

   Equally important, they appear to have lost the confidence of a significant portion of the Vermont legislature. The evidence for that conclusion is that the legislature has insisted on hiring its own consultant to duplicate the effort by the administration to develop technical data necessary to complete the Shumlin plan.

   Wasting money like that can only be justified by a conclusion on the legislature’s part that they can’t trust the information they get from the administration. There is no apparent reason to paint the Green Mountain Care Board with that brush---the GMCB’s performance on getting costs under control has been exemplary. Nor is it likely that anybody distrusts Michael Costa, the tax expert that is working on the financing plan for reform.

   Moreover, there was no movement at all in the legislature and the Joint Fiscal office, the legislature’s data arm, in the direction of hiring its own consultants to replicate the data they would get from the executive branch. They didn’t need their own consultant for the original Hsaio plan, nor for the plan drafted by a University of Massachusetts consulting firm. Nor for the passage in 2011 of Act 48, which came from the administration planners.

   It was only after press reports that the Shumlin administration had known in the spring of 2013 that the Exchange was a mess, while continuing to issue reassuring reports, did the Legislature revolt. Their first move was to hire Ken Thorpe, a health policy consultant from Georgia, to advise them in the 2014 legislative session. You could argue that the $40,000 they spent on that was wasted also. Nothing appeared to come of it, and in fact no one seemed interested in retaining Thorpe again.

   In the light of all this, it seems clear that the Legislature’s action in getting a consultant now to get the same information the administration is gathering is driven not by a substantive need for the resulting data but by the distrust that has permeated the legislature.

   It’s perfectly reasonable to ask why somebody hasn’t been fired, given the record of performance on the Exchange. Well, the governor, who bears a piece of the responsibility for misleading the legislature on the Exchange, is not going to fire himself.

   And he is also apparently not firing either Racine or Larson, which would have happened long ago in the private sector and to lesser extent in state government. But that is not Shumlin’s style.

   Hence the need for Lawrence Miller. And on the record of the last three weeks, Miller is not kidding anybody. His assessment of the mess at DVHA couldn’t have been more blunt. Under his watch, the state recently severed its ties with CGI, the Canadian information technology company that designed Vermont’s exchange. Miller is the man with the broom ready to clean up the exchange mess.  And it would be hard for anybody to believe that he isn’t determined to fix it.

   It is impossible to know at this point whether he can fix it—fixing it meaning not only that the Exchange begins to work, but that the whole reworking of the information systems for AHS takes hold. That effort is in the early stages, but the primary change has been Miller’s moves to get more operational skills as opposed to policy expertise into the bureaucratic machinery.

   Racine, Larson and Larson’s chief aide, Lindsey Tucker, are all policy wonks. Policy they know, operations not so much. Hence the need for Miller, whose whole background consists of operational experience in the private sector. Miller has also recruited operational help in the person of David Martini, who has experience running an insurance company and who has been working for the Department of Financial Regulation. Another addition is Tom Boyd, who has operating experience at Rhode Island Blue Cross.

   In sum, there is a new broom and a new message, both of which were necessary if the Shumlin single-payer plan is not to die before it ever got fully launched.