Feds deal blow to Shumlin's plan for health insurance subsidies
February 06, 2013
Gov. Peter Shumlin’s $10.3 million proposal to fund health insurance subsidies is fraying at the seams.
The Centers for Medicaid and Medicare (CMS) said it is unwilling to fund roughly 20 percent of the subsidies’ cost, money which the administration was counting on.
This fiscal year 2014 proposal is composed of two parts: a $6.5 million allocation to help pay premiums for Vermonters earning up to 300 percent of the federal poverty line, and a $3.8 million allotment to reduce out-of-pocket maximum costs for income earners up to 350 percent of the poverty line.
These programs are meant to cushion the fiscal blow of the health benefit exchange, which is the health insurance marketplace that all Vermonters — who aren’t employed by businesses with more than 50 employees — are legally required to buy insurance from in 2014.
At that time, the state-subsidized insurance programs Catamount and VHAP will expire. Without state aid, the combination of premiums and out-of-pocket costs is slated to more than double for Vermonters earning 133-300 percent of the federal poverty line. 
To finance roughly 55 percent of the two proposed programs, the administration was preparing to request Medicaid funding through what is called a federal 1115 waiver. This waiver is what currently allows the state to spend Medicaid funds more liberally via its Global Commitment program.
The state currently uses this program to help pay for school health services, information technology and the salaries of certain health care regulators, among other items.
The state’s current waiver expires at the end of 2013, and the administration was hopeful that it could receive Medicaid contributions for these two low-income insurance programs under a new waiver.
But on Tuesday, CMS told the administration that it would not fund the $3.8 million cost-sharing program. CMS did, however, agree to fund the larger $6.5 million premium-assistance program.
CMS provides matching Medicaid assistance to Vermont at a standard rate of roughly 55 percent of the cost of a particular item. That means the feds will pay for 55 percent of the $6.5 million premium-assistance program.
What it also means is that the administration and the Legislature must find an additional $2.1 million of revenue for FY 2014, if they are to provide the entire $3.8 million for cost-sharing subsidies that they proposed. That $2.1 million represents the 55 percent of the cost-sharing subsidy that the administration was hoping the feds would fund.
In FY 2015, the $10.3 million is slated to double, which means the state would have to come up with roughly $4 million extra the following fiscal year.
The reason the administration only proposed $10.3 million for the new programs in FY 2014, which begins in July 2013, is that the exchange takes effect halfway through the fiscal year — at the start of calendar year 2014. Therefore, the $10.3 million is half the cost of an entire fiscal year’s worth of subsidies.
So, why won’t CMS fund the cost-sharing program?
According to Robin Lunge, the administration’s director of health care reform, the feds didn’t elaborate in great detail, but they reportedly said the program would be difficult to run in light of the sea change set to stir up the nation’s health care finances in 2014 — most of which is caused by the federal Affordable Care Act.
“I think, in part, it was a capacity issue,” Lunge added.
Moving forward, the administration is aiming to submit a new revenue proposal to the House Health Care Committee on Thursday.
“It’s possible we won’t be able to get the work completely finished … but we hope to get them a revised proposal at the end of the week at the latest,” Lunge said. “We’re currently considering what our options are and what we’ll propose because of course there are a number of different ways we could proceed.”