by Hamilton E. Davis
Vermont is now a little over a month into the first full year of its health care reform’s execution phase, and things are moving along fairly smoothly, at least as smoothly as one might expect for such a fraught public policy enterprise. The Green Mountain Care Board has cut the historic rate of annual hospital budget increases in half, and OneCare Vermont is expanding its 30,000-patient 2017 Medicaid base in northwest Vermont to roughly 122,000 Medicaid, Medicare and Blue Cross patients across much of the rest of the state. So far, so good.
The Legislative session, meanwhile, is in full swing, accompanied by no more than the normal angst. The House Health Care Committee is continuing its efforts to figure out how the system is supposed to work; the Senate is working on legislation to permit importing cheap Canadian drugs, a good idea; and whether to shift all primary care financing to a state tax, a terrible idea that will attract a ton of feel-good support, but which is certain to run into Governor Phil Scott’s core governing principle—no new taxes. None of this activity is directly related to the way the reform project actually works.
Underneath this relative tranquility, however, powerful anti-reform currents are at work that pose a real threat to the Vermont project. One such current is the lack of effective political leadership for reform in either the governor’s office, or in the Legislature. The second is the reluctance of a significant minority of primary care doctors in the state to accept the proposition that the delivery system needs to be restructured. (That, in fact, is the source of support for so-called Universal Primary Care, now on the table in the Senate). The tiny corps of adepts that constitute my readership will recognize that I have written about the issue of political leadership before; I return to it now because it has moved closer to the surface, and, moreover, because there is a new target—the Green Mountain Care Board itself. That constitutes real danger: the success of reform in Vermont depends on the intricate dance between OneCare Vermont, and by critical extension, UVM, and the Green Mountain Care Board. Both of those players need to bring their A games every day or the project could be crippled. The hard question now is how to assess the threat…
The Mike Smith Caper
A few months ago, Governor Scott nominated Tom Pelham, who served as Tax Commissioner in the Dean and Douglas administrations, to fill the vacancy on the Green Mountain Care Board created by the retirement of Con Hogan. Pelham had spent the Shumlin years in the governmental wilderness and during that time he published some commentary on state financing from a fairly conservative perspective.
In the light of that background, the advocacy group Rights and Democracy urged the Vermont Senate to refuse to confirm Pelham for the Hogan seat. The advocacy group cited three Pelham commentaries in VTDigger and The Rutland Herald; these touched on health care reform, but their main thrust was a critical riff on the spending proclivities of state government, especially the Legislature. I count myself among those who strongly support the Vermont health care reform project, but I could find nothing in any way unreasonable, factually wrong, or poorly argued in these articles. In any case, Pelham is now sitting on the Board and is certain to be confirmed.
There is no way yet to tell where Pelham will come down on the substance of the issues before the Board. He could turn out to be bent on undermining reform—or not. My inclination is to take him at his word that he supports the All Payer Model, the litmus test in the reform era. The deeper significance of the Pelham issue in the near term is not so much his appointment as some of the reaction to it.
I am referring here to a column written for VTDigger by Mike Smith, who also hosts a radio program on policy and political issues. (He recently retired from his commentary gigs) Smith’s direct political experience was as Secretary of Administration in the Douglas administration; in that capacity he was Tom Pelham’s boss. He was also a close colleague of Jason Gibbs, who served in several key posts under Douglas and who now serves as Chief of Staff to Governor Scott. Smith is not just a talking head, Smith is connected. So, it’s worthwhile looking closely on what he wrote.
Smith’s argument runs along these lines: the Green Mountain Care Board was created to “oversee and regulate the state’s planned single-payer health care system” and as a means toward that end was empowered to recruit a fully elaborated technical and policy staff. Smith asserts that the death of the financing aspect of single payer has so changed the reform environment that the mission of the Board needs to be significantly recast, and while Smith doesn’t say this directly, downgraded…some of his commenters on Digger interpret this, accurately I think, to mean the Board should be repealed. In fact, there is now a bill in the House that would repeal the Board, although no action on that is likely.
Irrespective of this last point, the real issue is whether the Board is doing what it should be now; in other words, whether Smith’s assumptions are valid. In my view, his assumptions are totally and demonstrably wrong. He has a right to his opinions, of course; and it’s not as though he doesn’t have company. Spend some time in the Senate and House health care committees and you will see very quickly that there is considerable opposition to the reform track the state is on. And it isn’t just in Vermont: much of the national press gave up on Vermont reform when the financing side went away; so did at least some of national health policy community.
So, Smith and these other policy players are all wrong? Yes, precisely, totally. Herewith the case:
The first single payer health care system in North America debuted in Canada in 1984. The going-in system was fee-for-service with multiple payers. In their new system, the Canadian national and provincial governments picked up all the costs, and raised the money through taxation. At the patient level, the care was free. The structure of the hospital system remained the same: doctors and hospitals competed with one another and got paid per episode of care.
In 1984, the Canadian delivery system had excess capacity, more hospital beds and doctor availability than they needed. Within months the huge demand kicked off by the new financing system blew through the excess capacity and the Canadian system began to impose constraints on access to the point where it had some of the worst access in the western world.
So, when the Shumlin administration built its single payer in 2011, it didn’t start with access, it started with cost containment. The Shumlin plan had two main pillars—cost containment first, and once that was accomplished, a shift of health insurance premiums and other private financing (about half the total cost) to the Vermont tax base. In his early speeches on the subject, Shumlin said repeatedly: “If we can’t get costs under control, we’ll pick up our marbles and go home.”
In December of 2014, Shumlin picked up his marbles and in 2016 he went home. Importantly, however, the marbles he picked up were the financing marbles—the Green Mountain Care Board kept right on rolling toward cost containment, and so did OneCare Vermont, the state’s ACO. Today, Vermont is closer to achieving sustainable health care costs than any other state in the country. Federal Medicare officials understand that and they are praying we succeed, because health care costs are killing the federal budgets (Medicare) and state budgets (Medicaid).
That’s why Smith is wrong. He acknowledges that there has to be regulation of hospital budgets, the engine of health cost inflation. What he doesn’t get, or doesn’t want to get for political reasons, is that we still have to move from fee-for-service reimbursement to block financing to get costs under control. Failure to do that will cost Vermonters hundreds of millions of dollars in unwarranted health care payments, and it won’t take long to get there.
I have suggested above that maybe Smith doesn’t want to see reality in this issue for political reasons. I don’t know Smith and I have no direct knowledge of his motivation, but consider:
One of the most egregiously inflationary decades in Vermont’s hospital history ran from 2000 to 2009. During that period, nearly every hospital in the state doubled its spending, with no obvious demographic changes. Hospital costs went from $922 million to $1.7 billion, a dollar difference of $756 million, less than half of which was reasonably justified. People got older, of course, but at a tiny annual rate compared to the health care costs.
The Governor for eight of those 10 years was Jim Douglas. His Secretary of Administration was Mike Smith; his Secretary of Civil and Military Affairs was Jason Gibbs, who is Chief of Staff to the current governor. That administration did nothing to rein in the health care cost engine. In fact, it was the decade of the “oughts” that finally convinced every serious policy person that something had to be done to solve the cost problem. The burden of the Smith column was to suggest that this history did not exist, and that the Green Mountain Care Board has become something of an expensive luxury.
Maybe this is all coincidence, but in my view, the single most important factor in the political environment for health care reform is the fact that Phil Scott is massively conflicted over it. Other than blocking any new taxes, and the fantasy about turning Vermont into some amalgam of eastern Massachusetts and Boulder, Colorado, Scott doesn’t appear to have any substantive policy ideas of his own. But health care reform is plowing steadily ahead and Scott is clearly befuddled by it.
On the one hand, he has told the federal Medicare officials that he was “all in” on reform. As far as his own public is concerned, Scott has basically told the people nothing. As his Secretary of the Agency of Human Services, Scott hired Al Gobeille, who, as Chair of the Green Mountain Care Board, did a brilliant job negotiating a ground-breaking agreement with the Feds that is taking Vermont to the forefront of 21st century American medicine. Gobeille may be doing a good job as Secretary, but he has basically vanished from the health care reform scene, despite the fact that he knows as much about it as any of the players at any level. I believe that Gobeille’s retreat from the legislative scene is being driven by Gibbs. The only Gobeille appearance in a long time was his recent testimony before Senate Health and Welfare in opposition to the Universal Primary Care bill, which would require a new tax…so, forget about it.
At this point, I can sense some skepticism from my corps of adepts. Is there evidence that Scott wants to kill the Green Mountain Care Board? Fair enough. My belief is that Scott himself really doesn't want to do that--it would be too much of a political mess. But I think it's clear that Gibbs does--and that sentiment along represents a serious threat to the Board's ability to do the work it needs to do. The argument for that looks like the following:
The course of reform depends on the outcome of a delicate minuet between the Green Mountain Care Board, and OneCare Vermont, to shift the financing and culture of the whole medical delivery system. A couple of weeks ago, Scott’s budget guys told Kevin Mullin and the Green Mountain Care Board that they would have to cut from their budget for the state’s fiscal year 2019, which starts July 1 of this year, by $250,000.
That is a 9.4 percent reduction in one of the single most important pieces of state government. What is more striking is that this cut, which will force the Board to lay off three of its 28 employees, will actually save only $75,000, which comes to just four one thousands of one percent in the $1.8 billion General Fund. That number is so small it will get lost in the rounding of the state budget... A budget cut of just under 10 percent, and a 12 percent reduction in its staff to save four one thousands of one percent—is that really about repairing the General Fund, or is it a transparent political move by Scott to push health care reform even further under the Fifth Floor rug, and maybe provide some surcease from the Gibbs pressure as well. And with Mike Smith operating as a stalking horse for his old Douglas-days partner?
Draw your own conclusions. Mine should be pretty clear by now. But the core question remains: Will the Green Mountain Care Board be able to continue as the effective leader of health care reform in the state?
I'll come back to that issue on Tuesday.