For the week ending January 28, 2002

Political Overview
Gov. Howard Dean delivered his final budget to a Joint Assembly of the House and Senate this week, setting the stage for a potentially volatile debate over taxing and spending in FY 2003. In the House, the Committee on Appropriations continued to mark-up the FY 2002 Budget Adjustment Act, an annual exercise that makes adjustments to the budget based on revenue and spending trends. This year's Budget Adjustment is made particularly difficult by the slower economy and declining revenues.

In the House, the partisan and ideological divide was apparent this week, as that chamber spent considerable time debating resolutions on abortion and the Pledge of Allegiance. In committee work, the House Committee on Health and Welfare spent a second full week dealing with Medicaid, the state-run health program that is feeling the pressures of expanded enrollment and tightened budgets. The Committee on Ways and Means continued its work on revisions to the Vermont income tax, hoping to craft a long-term solution to avoid significant revenue losses from the federal tax cut enacted by Congress last year.

In the Senate, the Committee on Finance heard testimony on prescription drugs, once again looking for a solution to their rising cost and increased utilization. The Committee on Health and Welfare heard testimony on Gov. Dean's proposal to expand the Vermont Health Access Plan (VHAP) to allow small businesses to buy-in to that plan for health care benefits. Finally, on Tuesday, Diane Snelling was sworn into the Senate to succeed her mother, Barbara, who resigned earlier this month due to health concerns.

Gov. Howard Dean Delivers Final Budget to the General Assembly
Gov. Howard Dean delivered his final budget to a Joint Assembly of the House and Senate on Tuesday, outlining a plan that proposes $891 million in general fund spending for FY 2003, a mere 1% increase over this year's revised budget. Lawmakers are confronted with difficult choices this year: make deep cuts in health care, transportation and education spending, or raise various taxes and fees to cover the costs of these programs and services.

The Governor proposed more than $16 million in cuts to Medicaid. The Governor's spending plan would eliminate certain benefit programs and require some participants to pay higher co-payments for the health care services they receive. The Governor challenged the legislature to avoid these cuts by adopting a 67-cent increase in the cigarette tax. At this point, the legislature's path remains unclear, but lawmakers are clearly under tremendous pressure to avoid reducing Medicaid benefits.

The Governor reversed his own path from last year by proposing more than $2 million in reductions to provider payments. When calculated with federal matching funds, this $2 million reduction in state provider payments translates to approximately $4.5 million in provider payment reductions. Last year, the Governor and the legislature supported the elimination of the cost shift within four years.

The Governor finds himself presenting his budget to the General Assembly during economic conditions similar to those present when he took office. While the current recession is not as deep as that experienced in the early 1990's, it does present many of the same challenges that were present a decade ago. However, the fiscal discipline of the last ten years, including the creation of various "rainy-day" funds places the state on stronger financial footing than was the case during the previous recession. It is unclear when those funds will be tapped to address the current budget shortfalls; however the mere presence of these funds presents lawmaker with another option during their budget deliberations.

VAHHS Principles for Medicaid Reform
o As a short term measure, VAHHS supports increasing the cigarette tax to prevent Medicaid benefit and payment reductions.
o Until Medicaid is on sound financial footing, benefit expansions should be halted.
o All providers should pay the full cost of providing care.
o Providers, payers and policy-makers must collaborate on crafting policies and regulations that ensure that patients receive the right level of care, in the right setting at the right time.
o Consumer education in the areas of prevention, wellness and informed health care decision-making should be a top policy priority.
o Every effort should be made to improve the health care delivery system to ensure the efficient coordination of quality care to the sickest 10% of Vermonters.
o All healthcare stakeholders should cooperate on devising ways to stop, or at least slow the growth of health care costs.

Medicaid and Hospital Cuts
The House Health and Welfare Committee reviewed the Medicaid program and its projected deficit this week. The committee's goal is to develop a plan to scale back Medicaid programs to reduce the looming deficit and present it to the House Appropriations Committee for incorporation into the FY03 budget. They will begin with the Governor's recommended budget cuts that include the following $2 million of cuts in the General Fund for hospitals:

General Fund
Reduction in DSH Payments $ 187,150
Reimburse hospital outpatient at cost minus 10% 1,681,356
Freeze inpatient hospital rates 497,203

The Governor's action is a complete reversal from the language enacted into law last year which addressed the cost shift stating that the State shall, "eliminate, within a period of time no longer than four years, cost shifting and under-reimbursement in the Medicaid program" and "reimburse health care providers in the Medicaid program at least at the federal Medicare level." The FY02 budget also stated that the goal should be to "eliminating the Medicaid cost shift by reaching parity with the Medicare reimbursement standard would require substantial new Medicaid revenue: $12 to 19 million for Vermont hospitals."

This gubernatorial recommendation was not well received in the House Appropriations Committee Tuesday afternoon with several committee members questioning the rationale behind such a cut. VAHHS will be working with both House and Senate Appropriations Committee members to restore this funding over the next few months.

VHAP Buy-In
One of the Governor's major priorities this year is called the VHAP Buy-In proposal. This bill was introduced to help small businesses combat the high cost of health care and reduce the amount of uninsured in Vermont. S.254 proposes to allow adults or businesses with less than 50 employees to buy into the State-run Vermont Health Access Plan (VHAP). These businesses must not have offered health insurance to their employees for at least 12 months and a minimum of 75% of the employees must enroll. Additionally, the employer must pay 50% of the premium. Commissioner of the Department of Prevention, Assistance, Transition and Health Access Eileen Elliot told the committee that they would be looking to set the premium around $200.00 per month per individual. For that amount, the individual would receive the same benefit package as a Medicaid recipient.

VAHHS submitted comments this week on S.254 urging the Legislature to put the Medicaid program on sound financial footing before adding new programs and populations. VAHHS specifically stated concern about the following issues:
" Moving small businesses into VHAP could disrupt an already fragile insurance market.
" The eligibility criteria for S.254 appear to be very vague.
" The 75% rule would be difficult to enforce.
" The actuarial stability of the program appears questionable.
" S.254 aims to pay at Medicare levels but the language gives providers little assurance of achieving parity.
Although the committee has taken little testimony from insurers or businesses, they plan to vote this bill out favorable early next week.

Gross Negligence
The House Government Operations Committee struggled with the definition of gross negligence this week. Last year, the Office of Professional Regulation (OPR) suggested changing the definition to be a single instance of unprofessional conduct. Hospitals, physicians and many other non-medical licensed professionals were alarmed at this suggestion and have since been working with the OPR to find a compromise solution.

The current law defines "Unprofessional Conduct" essentially as a single act of gross misconduct, or repeated acts of simple misconduct. The OPR is motivated by the lack of a formal record when proving repeated simple negligence. The OPR claims that when proving repeated simple negligence, not only must they prove the instance at hand but it must also prove the previous instance all over again. Given the fact that several years can separate such instances of unprofessional conduct, the OPR has found this task difficult and therefore would prefer to have a record.

The current compromise offered to the committee this week suggested that in the first instance of simple negligence the licensed professional would receive a "private reprimand" which could then be used for the record if and when a second incident occurred. Several committee members seemed concerned that a medical professional could have one severe incident of unprofessional conduct and still be allowed to practice. This is not the intent of the OPR proposal and efforts will be made to clarify this for the Committee.

No Action on…
There were no hearings this week on several key hospital issues including the proposed changes to the CON process, the medical privacy bill or the drug-testing bill.

On the Agenda This Week
House Appropriations Committee - The Committee will finalize its work on the FY 2002 Budget Adjustment. The Budget Adjustment may be subject to full debate in the House later this week.

House Health and Welfare Committee - The committee will continue to focus on the state's Medicaid program, and will hold a public hearing on the topic on Thursday, January 31st from 7:00 to 9:00 PM in Room 11 of the State House. The Committee will also hold a hearing on H.547, which proposes to establish the Vermont health care plan as a universally-accessible, comprehensive, publicly-administered health benefit plan offering care and treatment to all Vermont residents. That hearing will be on Wednesday, January 30th at 1:15 PM.

Senate Appropriations Committee - The focus this week will be on the FY 2002 Budget Adjustment Act.

Senate Health and Welfare Committee - The Committee will be holding a hearing on Certificate of Need on Thursday, January 31st at 1:15 p.m. The committee will also hold a hearing on Tuesday, January 29th at 1:15 p.m. on S. 254, which proposes to authorize the commissioner of prevention, assistance, transition, and health access to offer buy-in health care coverage to individuals through a health benefit plan administered in connection with the Vermont health access plan program. On Wednesday, January 30th there will be a hearing on S. 224, a bill which proposes to amend the statutes relating to the abuse, neglect and exploitation of elderly and disabled adults.

House Government Operations Committee- The committee will continue their discussions on gross negligence.

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