For the week ending Friday, March 16, 2001

Lawmakers in the House returned from the Town Meeting week recess with a full agenda, spending most of this week in floor debate on matters both large and small. The House gave final approval with overwhelming support to H.475, legislation that makes changes to the Act 250 permitting process. The House also gave final approval to H.228, legislation that creates a uniform state privacy policy for how financial institutions may share consumers financial information. The fate of H.228 in the Senate is much less certain.

The Committee on Ways and Means continues to search for ways to eliminate the sharing pool in Act 60. While many agree that the sharing pool has been very controversial, members of the Committee are faced with the unenviable task of finding a way to pay for its elimination. Doing so will cost on the order of $80 million and Speaker of the House Walt Freed (R-Dorset) has put forth a plan to solve this problem using an increased sales tax.

Finally, the Committee on Appropriations was expected to give approval to the FY02 budget by Friday, but at the end of the week was unable to do so. It is anticipated they will approve the bill on Monday so debate by the full House may begin as early as this week. There is a general unrest among House Republicans, not only because of the constant murmur of tax increases but also because of the level of increased spending reflected in the Committee’s budget. Central to the debate on this budget will be how much of the spending will be considered "one time" spending initiatives versus ongoing spending. The budget presented by Gov. Howard Dean (D) reflected an overall increase of 5% over the current year’s operating budget, the largest increase he has ever proposed. The new Republican controlled committee has found it difficult to cut back spending. Additionally, there are several reasons for concern. Vermont has enjoyed strong income tax revenues over the last several years, due in large part to the robust stock market. As the market slows, income tax revenues will begin to lag as well. Couple that with the almost certainty of a retroactive cut in federal income tax rates, Vermont’s revenues could be hard hit. This combination of increased spending and lower tax revenues could spell disaster.

Medicaid Reimbursement

The amount of money being appropriated for relieving the Medicaid cost shift took a back seat to the actual language that would accompany the appropriation. Several times this week, members of the House Committee on Appropriations attempted to add language to the budget bill restricting hospitals’ ability to cost shift. VAHHS submitted language that added $4.1 million to increase reimbursement rates for hospitals and all other providers and recommended that VAHHS and PATH continue to work toward developing an efficient and effective payment system for Medicaid services. The committee adopted that language but tied receiving increased reimbursements to the implementation of a new payment system by 2006. VAHHS will continue to work to remove this quid pro quo since it’s not feasible to move to a new payment system until the cost shift is eliminated.

Additionally, the committee discussed a proposal to disallow the practice of charging non-Medicaid health benefit plans for any costs incurred in connection with services provided to Medicaid beneficiaries. In other words, eliminating the hospitals’ ability to shift costs that have not been paid. The committee did not adopt this language, however, since some committee members continue to be interested in adding this language, it may come up for discussion again. Once the budget bill is approved, a final report on the Medicaid section of the budget will be provided to VAHHS members.

Capital Construction Costs

The House Committee on Health and Welfare spent a considerable amount of time this week discussing capital construction costs and heard testimony from the Rutland Regional Medical Center and the Central Vermont Medical Center.

Rutland Regional Medical Center CEO Tom Huebner gave a presentation before the House Committee on Health and Welfare on construction costs and the request of the hospital’s 2.5% rate increase. He noted that the rise in health insurance premiums is due to insurance underwriting cycles, cost shift, demand for technology and especially pharmaceuticals. He reviewed the emergency department and power plants construction issues. Finally, he recommended that costs be kept under control, that capital projects be carefully reviewed, that the government pay for its promises, and that the consumer be connected economically to their choices on health care. Committee Chair Rep. Tom Koch (R-Barre Town) asked about competition among hospitals, about advertising and marketing of services.

Legislative Health Care Issues and Options

Legislative Counsel Herb Olson presented a discussion paper to the Senate Committee on Health and Welfare outlining three topics: equitable payment, outcomes based assessment and treatment, and promotion of health lifestyle choices, prevention and rehabilitation. Each section begins with a problem statement followed by questions for the committee to discuss and presumably answer.

1. Equitable payment
There is a belief that the Medicaid program fails to provide adequate payment to hospitals, physicians and other providers. The questions that follow include:

• What should be considered a fair payment standard for hospitals who serve the Medicaid beneficiaries?
• Should Vermont establish a uniform all payer reimbursement system for health care services?
• Should Medicaid be subject to Vermont’s prompt payment laws?
• How should the Legislature express its commitment to increase payment for Medicaid providers -- by appropriation, a multi-year appropriation to increase payments to eliminate the cost shift?
• Should the Legislature’s effort to reduce the cost shift be linked to lower hospital charges by requiring that as Medicaid reimbursements increase, surcharges on non-governmental payers decrease?
• Should the Legislature’s effort to reduce/eliminate the cost shift be linked to lower health insurance premiums by requiring that as Medicaid reimbursements increase surcharges included in the insurance premiums of non-governmental payers decrease?

2. Outcomes based Assessment and Treatment
Vermont has public policy goal relating to health care quality and cost containment but these efforts have reduced costs for some and shifted to others and in some cases has had an adverse effect on quality yet costs continue to escalate.

• Should BISHCA contract with VPQHC to develop outcome based assessment system that integrates best practices, functional status assessment patient satisfaction measurements and cost containment goal?
• Should hospital and provider be encouraged to develop approved uniform standards and should health benefit plans be obligated to delegate the application of such standards to certified hospitals and providers?
• Should BISHCA require that hospitals and providers to share data and performance records?
• Should patients and providers be given economic incentives by health plans to engage in outcomes based treatment?

3. Promotion of health lifestyle choices, prevention and rehabilitation
Medicaid does not always make the best use of the capacity of economic incentives to promote good choices by consumers.

• Should health plans be permitted to use financial incentives to promote patient engagement in health lifestyle choices?
• Should hospitals and providers be given incentives by plan to perform preventative and rehabilitative treatment?
  

4. Other health care issues
Many Vermonters are concerned with the overall status of the health care system despite the wide range of regulatory mechanisms to control costs.

• Should Vermont establish a common health benefit plan that defines what services we want to collectively purchase?
• What are options for assisting small businesses that offer health plan?
• Should hospital expenditures relating to community outreach and education be included as allowable costs for Medicaid reimbursement?
• What should Vermont expect from hospitals and providers in order to reduce health care inflation to an acceptable rate?
• Can more be done through regulatory mechanisms?
• Does the POC have the tools and capacity to perform the public roles assigned to it?

Coming Up

House Committee on Health and Welfare – This week the committee will focus on capital construction costs again and H.255, the clinical trials bill. Several hospital representatives are scheduled to deliver testimony.

House Committee on Appropriations – The main goal for this committee is to get the Big Bill out of committee which they hope today Monday. Preliminary debate before the full House will begin toward the end of the week.

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