Health Insurance Subsidies May Get Cut
December 02, 2012
By Peter Hirschfeld
MONTPELIER — Gov. Peter Shumlin says state health care subsidies for working-class Vermonters might be more generous than they need to be, and that some residents here could soon be facing higher insurance premiums and deductibles.
Administration officials and lawmakers will spend much of the next year fine-tuning the “health benefits exchange,” a hallmark of the federal Affordable Care Act projected to lower insurance costs for tens of thousands of Vermonters.
The online marketplace, set to go into effect in January of 2014, will mean federal tax credits or premium assistance for households making as much as four times the federal poverty level — about $89,000 for a family of four.
But the implementation of the exchange will also usher in the end of two state programs that have long subsidized insurance plans for lower-income Vermonters. And since federal assistance in the exchange won’t be nearly as robust as what’s available in the state programs, more than 17,000 residents enrolled in VHAP or Catamount Health are expected to see potentially dramatic increases in their out-of-pocket health care costs.
While Shumlin last week said he’ll protect some people from the increased exposure, he said others will have to make up the difference themselves.
According to new administration estimates, it could cost as much as $18 million annually to hold harmless every Vermonter facing diminished health care subsidies under the exchange.
“Obviously, we don’t have that kind of money around,” Shumlin said last Tuesday. “But we’re going to find a way to come up with a proposal that addresses some of the problem.”
Shumlin said he doesn’t think the cut in aid will in all cases impede access to medical services. He said Vermont’s assistance programs might be doling out money to people who don’t really need the help.
“You could also argue there are parts of our existing program that are more generous than they need to be, and that’s what we’ll be looking for,” Shumlin said. “We want to find a way to ensure that everybody can move into the exchange without much financial challenge and duress, and we think we can.”
Shumlin’s assessment has unsettled health care advocates who have been clamoring since last year for assurances that their clients won’t suffer adverse financial effects as a result of the new federal health care law.
“It’s very distressing to hear that not only does the governor not plan to hold everyone harmless, but that he thinks some programs are more generous than they need to be,” says Donna Sutton Fay, policy director for the Vermont Campaign for Health Care Security.
Catamount isn’t a new target for budget cuts. In 2010, then-Gov. James Douglas proposed a five-fold increase in Catamount deductibles — from $250 to $1,250 per year — as a means of helping close a $150 million budget shortfall.
But Sutton Fay says the cost increases faced by Catamount enrollees in the exchange are orders of magnitude larger than what Douglas proposed in 2010.
For example, an individual living at 200 percent of the poverty level — about $22,000 annually — will see out-of-pocket exposure jump from $1,770 per year under Catamount to nearly $3,500 in the exchange. The disparity only widens as incomes rise.
For a couple making $45,300 per year — 300 percent of the federal poverty level — out-of-pocket expenses could more than double, from about $7,000 in Catamount to more than $16,800 in the exchange.
Shumlin aides have indicated that the administration’s proposal, to be unveiled in January, will take care of the desperately poor, and seek modest increases in cost-sharing from Catamount and VHAP beneficiaries on the higher end of the income eligibility scale.
The increases won’t affect everyone enrolled in the Vermont Health Access Program. Of the 37,000 people in VHAP, about 80 percent will soon be folded into Medicaid, where they will receive assistance at least as generous as what they’re getting now.
But for the approximately 7,400 VHAP enrollees who won’t get rolled into Medicaid, and for the entirety of the 10,700 people in Catamount, Sutton Fay says, health care costs could become prohibitive when Vermont flips the switch on the exchange.
Robin Lunge, director of health care reform, says she’s modeling the administration’s proposal on places that Vermont views as exemplars of reform.
“We’re looking at other countries and other states, like Massachusetts, that have effective measures to look at not only what income level does (assistance) go up to, but also what amounts do they provide,” Lunge says.
Sutton Fay says many Vermont families simply can’t afford any increase in their already considerable insurance costs.
“We remain really concerned about, first of all, whether people will even enroll when they see what it will actually cost in the exchange,” Sutton Fay says. “And then if people do enroll and get sick and meet that out-of-pocket maximum, that’s going to be a very, very scary financial situation for those people.”
Amid the coming budget debate over subsidies, Shumlin said Vermont needs to keep its eyes on the prize: a publicly financed single-payer health system he says will be in place by 2017. Achieving that goal, he said, means bringing costs down now.
“While giving access to people who can’t afford health care certainly is the right thing to do, it doesn’t do much to contain costs,” Shumlin said. “It does something — it’s a small step. It tends to move people from the emergency room to preventative care, but it’s a small segment of the population.”
The real attention, he said, needs to be paid to a payment reform project that Shumlin said moves “away from a fee-for-service payment system to one where we reimburse our providers for making people healthy.”
“We just don’t have enough dough to keep spending on health care at an unsustainable rate and not have people be healthier than other provider systems around the world (that spend much less),” Shumlin said.
Sutton Fay, however, warns that Shumlin’s end game is tied inextricably to the steps he’ll need to take to get there. While the “exchange” and “single-payer” aren’t the same thing, Sutton Fay says the general public doesn’t draw a distinction between the two.
“These are two completely different things that wrapped up into one, for the lay public,” she says. “And so if the exchange is unaffordable for people, you’re going to have a hard time convincing them that this single-payer idea is going to be any better.”