House Restoring Some Of The Governor’s Cuts. Some Money Backfilled. A Lot Not.

"The [House’s] proposed [reduction to hospital reimbrusements] compromise saves only about one-third of the $6 million in reductions outlined in the Democratic governor’s plan. [BISHCA Comm.] Kimbell said the administration will support the new proposal, but only if lawmakers can make up the difference without raising taxes."

No word on how this new $12 million hole will be filled.

Article published Mar 16, 2011
House to reverse some Shumlin cuts
By Peter Hirschfeld
Vermont Press Bureau
MONTPELIER — Leaders in the Vermont House of Representatives say they plan to undo some of the cuts to human services contained in Gov. Peter Shumlin’s budget proposal.

Rep. Martha Heath, a Westford Democrat and chairwoman of the House Committee on Appropriations, said she plans to unveil a budget on Friday that restores funding to some of the programs targeted in Shumlin’s fiscal-year 2012 spending plan.

“I’m sure it won’t be as much as some members of the body would like,” Heath said Tuesday. “But I’m sure it will be better than the budget as proposed by the governor.”

The pace in Montpelier has quickened this week as House lawmakers put the final touches on their version of the budget, scheduled to be voted out of the Appropriations Committee next Monday. Though budget line items have yet to come into full focus, House Speaker Shap Smith on Tuesday said he anticipates restoring at least a portion of the 5 percent reduction to mental-health services Shumlin called for.

“We’re looking pretty seriously at reducing some of the budget cuts in the mental health area, but we won’t be able to buy them all back,” Smith said.

Smith and Heath say they intend to avert the cuts without resorting to tax increases. Congressional legislation that eliminates interest payments on federal loans to state unemployment insurance funds will free up about $8 million in next year’s general fund. Heath said her committee is pondering a series of moves that could give lawmakers more financial wiggle room to accommodate other programs targeted by Shumlin.

“Are there places where we could reduce the appropriation the governor has recommended? Do we have new information that would tell us we didn’t need to spend as much as the governor has recommended? Is there new information about money that might be available if we did things a different way?” Heath said. “I hope on Friday that we’ll be looking at the money we’ve made available to fill some of the holes, and show the holes we’ve identified to fill.”

Among those holes is a portion of $6 million in reductions to the Catamount Health Program. Shumlin achieved those savings by folding Catamount into the Vermont Health Access Program, a state-subsidized health-insurance system for the state’s poorest residents.

The savings accrue largely because medical providers receive lower reimbursements in the VHAP program. Push back from hospitals and doctors, however, has compelled lawmakers to consider a revision that maintains Catamount Health, with modest reductions in reimbursement rates.

“Hospitals would take a small cut in their reimbursements, but not nearly as much as they would under the original proposal,” said Rep. Mitzi Johnson, a South Hero Democrat and vice-chairwoman of the House Committee on Appropriations.

Bea Grause, executive director of the Vermont Association of Hospitals and Health Systems, said the revised proposal would largely ameliorate hospitals’ concerns.

Steve Kimbell, commissioner of the Department of Banking, Insurance, Securities and Health Care Administration, helped broker the revised proposal with officials at Blue Cross Blue Shield of Vermont. The private insurer underwrites the plans of about 90 percent of the 12,000 people on Catamount.

“We got a lot of push back on our original proposal from the provider community particularly, but also from insurers,” Kimbell said.

The proposed compromise saves only about one-third of the $6 million in reductions outlined in the Democratic governor’s plan. Kimbell said the administration will support the new proposal, but only if lawmakers can make up the difference without raising taxes.

“What the governor has said all along is he’s concerned about the bottom line on the budget,” Kimbell said. “We’re open to other ideas on how to accomplish that.”

Advocates say the new proposal solves the financial problems of providers but does nothing to address the strain on low-income Vermonters on the program.

A portion of the savings in Shumlin’s plan comes from raising deductibles for Catamount beneficiaries from $500 per year to $1,200 annually. That increase remains in the House’s current budget plan.

Peter Sterling, executive director of the Vermont Campaign for Health Care Security, said low-income enrollees would benefit if Catamount was folded into VHAP. Since Catamount policies are underwritten by private insurers, he said, they are vulnerable to volatile and ongoing price increases in the private market. In 2010, Sterling said, Blue Cross Blue Shield filed for three separate premium increases; MVP, another one of the three main private insurers operating in Vermont, hiked rates in all four quarters.

“One of our concerns is that Catamount Health premiums have gone up between 36 and 52 percent since 2007,” Sterling said. “That’s one reason we were so excited about Catamount being folded into VHAP.”

He said lawmakers will look to recoup those increases by imposing higher co-payments and deductibles on Vermonters in the program.

“History has shown that when there’s a shortfall in Catamount, the Legislature looks at raising deductibles,” Sterling said. “And that’s not something I think enrollees in Catamount Health can really afford at this point.”

Johnson said her fellow committee members are concerned about the higher deductibles.

“It’s a lot of money for families in those income brackets to absorb,” she said.

Shumlin proposed partly offsetting higher deductibles by eliminating prescription drug co-payments, which don’t exist in VHAP. Johnson said that’s a concern because “it really creates a barrier to accessing primary care, which I feel is a problem.”

Meanwhile, other legislators are looking at revenues.

Shumlin has called for a new tax on private health insurers and dentists to raise $16 million in fiscal year 2012. The so-called “provider tax” would be assessed on the three primary private health insurers in Vermont — Blue Cross Blue Shield, MVP and Cigna — as well as on the revenues of every dentist operating in the state.

A proposal now under consideration in the House Committee on Ways and Means would instead raise the revenue through what is known as the “claims tax.”

“The nice thing about the (claims tax) is that it is paid by all health insurers, and health insurers is defined very broadly,” said Kimbell, who said the Shumlin administration is open to the change.

And some lawmakers said Tuesday they think the idea holds promise.

“Hitting managed-care organizations hits only a part of the insured population,” said Rep. David Sharpe, a Bristol Democrat and vice-chairman of the House Committee on Ways and Means. “And we’ve had a lot of education over the past year about how broader bases and lower rates make more sense than having a more narrow focus.”