A new report is challenging the basic financial assumptions of Governor Peter Shumlin’s single payer health care plan. The report says Shumlin’s proposal drastically underestimates several key parts of the system. But the Administration says authors of the report have made some critical errors of their own.
The report was commissioned by a number of health and business organizations in the state that have questioned the single payer approach. The group includes the Chamber of Commerce, the Business Roundtable, the Vermont Medical Society and Vermont’s Hospital Association.
"But if you kind of started looking at them and pulling them apart a little bit, it makes you start to stop and question things." - Eric Hammelman of the Avalere Consulting Group
Eric Hammelman of the Avalere Health Consulting group, told members of the Legislature’s Health Care Oversight Committee that the administration’s financial analysis is flawed.
“What we found, though, were a couple of assumptions in that that were valid at face point,” said Hammelman.
"But if you kind of started looking at them and pulling them apart a little bit it makes you start to stop and question things a little bit.”
Hammelman cited several major problems with the Administration’s plan. First, he says, it slashes reimbursement rates to health care providers far below today’s rates - a move that he says will create a hardship for many physicians.
Hammelman says the Governor’s plan also calls for major savings by reducing administrative costs in a single payer system. The goal is to get those costs down to roughly seven percent. But he says those savings won’t be there because the state’s largest insurance company, Blue Cross, has already reduced its administrative expenses to under five percent.
The bottom line, according to Hammelman, is that the cost of implementing a single payer system is much higher than the current estimate of $1.6 billion.
“If you assume that the administrative savings from the payer side were not necessarily going to emerge, that can lead to an increase of about $126 million relative to the $1.6 billion,” said Hammelman. “And if you assume providers need to be reimbursed for their commercial patients specifically at a higher yield relative to Medicare, you could be looking at upwards of $450 million increase.”
Robin Lunge is the director of Health Care Reform for the Shumlin Administration. She says the report concluded that, on average, health care providers are paid roughly 122 percent of the Medicare reimbursement rate. That figure, says Lunge, is too high and therefore the report’s cost estimates are inflated:
“We don’t agree with all of the assumptions made by their methodology coming up with 122 percent of Medicare was simply weighted by a number of people,” said Lunge. “When our actuaries looked at a weighted average based on age and all those other factors including cost of care our average was 107 percent of Medicare.”
And Lunge maintains the state would still save a significant amount of money even if all of the assumptions in the new report are true:
“If that still covers everybody at a higher benefit rate than we have today,” said Lunge. “And we still do better. So [we] end up with everyone insured [and] with a better benefit on average than what folks have. So that’s still an improvement in our system for Vermonters.”
The release of the report is the beginning of what is sure to be a robust debate at the Statehouse over the financing of a single payer system. That debate is expected to take place during the 2015 session.
