January 21, 2011 – Week 3

While tax reform was the buzz last week, health care reform drew the major focus this week. The long-awaited report from Dr. William Hsiao, the Legislature’s consultant on health system design, was released Wednesday. Earlier in the week, Senators Leahy and Sanders and Congressman Welch joined Governor Shumlin at the State House for a press conference to announce that they will sponsor legislation to amend the federal health care law to allow states to obtain waivers for pilot programs in 2014 rather than 2017.

Dr. William Hsiao, an economist in Harvard’s School of Public Health, provided legislators with his draft report, which includes three options for reforming Vermont’s health care system. You can read the report and view a presentation by clicking here. Most importantly, the report is a draft and comments are being accepted. You can offer your comments by email to comments@vermontact128study.com until February 3, 2011.

Dr. Hsiao’s report focuses on three options for reforming Vermont’s health system:

Option 1:
1A) Government-run single payer system with comprehensive benefit package
1B) Government-run single payer system with essential benefit package
Option 2: Public Option
Option 3: Public-Private single payer system
(Essential benefit package, independent board, third party manages provider relations and claims processing/adjudication)

Dr. Hsiao recommends that the Legislature consider Option 3 for several reasons: he and his team feel it is most likely to be accepted by stakeholders, it would produce the most savings, it would rely on the market when possible, it would minimize political interference, and has built-in transparency and accountability. Specifically, Dr. Hsiao feels that the independent board that would govern the system in Option 3 would remove political pressure from the decision-making. He envisions the board to be made up of members of the employer and provider communities. With Option 3, Dr. Hsiao believes Vermont could save roughly 25% of its total health care spending by 2015 or $590 million. Savings would come from administrative costs, reducing waste, tort reform, changes in governance/structure, expansion of Vermont’s Blueprint for Health, and an integrated delivery system. Dr. Hsiao told legislators that a more comprehensive health care benefit, which would including nursing and home care, is not affordable for the state at this time and they should focus on an essential benefit package for now.

The report recommends paying for the plan through a payroll tax of roughly 11% on employers and 3.6% on employees. Employers of low wage employees and low wage employees would be exempt from the tax. Small employers with fewer than 10 employees that do not currently offer insurance and would not fall under a low-wage employee exemption would likely pay more than they do now under the proposal. The proposal would also include companies that currently have self-managed health care plans under the Federal ERISA law although Dr. Hsiao believes the state’s legal ability to preempt federal law in this case is somewhat unclear.

The Shumlin Administration is expected to unveil a bill that includes a plan for single payer health care that will carry out three priorities: laying the foundation for a single payer health care system, preparing Vermont to comply with the federal health exchange requirement, and a focus on cost containment. With regard to cost containment, Steve Kimbell, Commissioner of the Department of Banking, Insurance, Securities and Health Care Administration believes that Vermont needs to move away from a fee for service system of health care, but that without the agreement of the provider community, any such effort would fail. Commissioner Kimbell indicated that their priorities would be multi-year reforms adding that the Governor’s “first priority is cost containment because we can’t have access and quality of the kind we want if we can’t contain costs.” Governor Shumlin indicated in his weekly press conference that his bill will not contain a method for paying for a single-payer health plan as he wants to focus on cost containment first.

As the Legislature considers this complex issue, the Chamber and GBIC will actively participate in all discussions and bring the richness and diversity of our members' views to the table. Our position will be guided by three principles: does it contain costs while improving quality care and outcomes for Vermonters; does it help Vermont's business community create new jobs and economic well-being for Vermonters; is the plan financially sustainable over the long term. All members should feel free to send comments to cathy@vermont.org. We will make sure that your voice and opinions are heard.

“We aren’t going to be rescued by revenue growth” were economist Tom Kavet’s words to legislators when asked about how the Legislature should grapple with the FY 2012 budget deficit. Kavet presented legislators with an overview of a slightly improved revenue forecast, which is used by the Governor and Legislature to adjust current year spending and build the next year’s budget. Kavet indicated that while the forecast includes increases to state revenues, these changes were really technical in nature and for the most part, based on one-time events. Part of that increase was due to increased corporate profits, which Kavet stated are bolstering both Vermont and federal revenues. He went on to say that while unemployment is still relatively high, Vermont and New Hampshire have the lowest unemployment rates in New England. Finally, Kavet told legislators that he believes recent actions by the Federal Reserve Board will prevent a double-dip recession. You can read the full report by clicking here.

The House Natural Resources Committee continued discussion of a renewable energy bill, H. 56. The bill would: expand the renewable energy targets Vermont electric utilities must reach and integrate renewable portfolio standards into the program, expand the state’s standard offer program which requires Vermont utilities to buy in-state renewable energy generation at a standard price, impose a $1.50 per bill charge to electric bills in order to support the Clean Energy Development Fund, expand the state’s net-metering program, and move the home weatherization assistance program to the Efficiency Vermont program.

The House and Senate Committees with jurisdiction over housing spent time learning about the issues surrounding this economic sector. Sen. Illuzzi, R-Essex/Orleans Co. asked nonprofit providers for ideas as to what could be done by the Legislature to reduce the development costs of affordable housing. He also inquired about what could be done to encourage more involvement by the private sector. Sarah Carpenter of the Vermont Housing Finance Agency described requirements such as lead based paint mitigation, accessibility, housing codes, and historic preservation issues that must be addressed as a condition for state and federal tax credits. She also spoke of the need for better coordination between the Agency of Human Services, Corrections Department and the housing community in order to address the needs of very low-income populations.

The House Commerce and Education Committees held a joint meeting to gather information from the education community and workforce training providers. John O’Kane of IBM and the Workforce Development Council described the Council’s mission, which is to bring employers, providers and the educational community together to address the educational and training needs of Vermont’s workforce. He spoke of the difficulty in hiring entry level employees who have basic computer skills and the “mismatch of skills” now available in the workforce versus what is needed by employers. Solutions offered by O’Kane and others testifying included: breaking down silos and working together in an integrated system, acceleration of education for advanced learners, career awareness, and internships and support for state programs such as the Vermont Training Program.

• The House will be acting upon the mid-year adjustment to the budget on Friday.

• The Vermont Tax Practitioners offered a number of specific concerns to the Ways and Means Committee about the complexity of the state’s tax system.

• The Agency of Transportation reported on the status of the Circ Highway in Senate Transportation. A water quality permit is still pending from the U.S. Army Corps of Engineers before final design, permitting and land acquisition can take place.

• Over 80 House bills and 18 Senate bills have been introduced to date. These bills can be found online by clicking here.