Anne Galloway, Vermont Digger
The problem with health care in Vermont can be summed up in one word — fragmentation — according to Dr. William Hsiao, the Harvard-based economist who is designing health care models for the state.
Vermont’s patchwork of duplicative private, federal and state medical programs, payment systems and insurers, he told members of the Vermont Health Care Commission yesterday, leads to inconsistent care for patients, unnecessary services, waste, inefficiency, fraud and high administrative costs — not to mention the fact that thousands of Vermonters don’t have access to what he calls a “non system,” because they can’t afford health insurance.
In an hour-long presentation at the Statehouse, Hsiao described the “method of engagement” that his team of 12 analysts will use to address Vermont’s health care problems.
“We know the patient has a high fever and stomach pains, we know what the problems are,” Hsiao said. “Our job is first to diagnose the fundamental causes of these problems.” Under Act 128, Hsiao is charged with designing two different plans for Vermont with a specific mandate. The first is a state-run universal coverage and single-payer plan. The second is a “public option,” which would compete with private plans. A third plan is also required under the law, but its parameters are purposely vague — it merely requires the consultant to devise an option that is politically and practically viable.
Lawmakers passed the law in the last legislative session with the hope that Vermont could find a way to curb costs, which are escalating dramatically. According to estimates from the Vermont Banking, Insurance, Securities and Health Care Administration, costs will go up $1 billion this year, bringing the total amount Vermonters spend on health care from $4.9 billion to $5.9 billion.
Hsiao is using a systems approach to tackle Vermont’s costly and unwieldy health care programs. He is first conducting a stake holder analysis to “ascertain what is politically and practically viable,” Hsiao said, which will be followed by the development of fully integrated, uniform patient care and finance systems – as opposed to the hodgepodge of health care programs and payment options now available.
An effective and efficient health care system – like the one Hsiao designed for Taiwan in 1995 – is fully integrated, he said. One of its defining characteristics is a uniform medical claims processing system for all health care providers — as opposed to the highly complex billing and insurance administration systems now used in Vermont.
Hsiao acknowledged that state leaders have made a concerted effort to provide coverage to uninsured Vermonters through programs like Dr. Dynasaur and Catamount Health. “You’re trying to do the best you can to plug the holes,” Hsiao said.
But none of these programs, he said, including Catamount Health (a subsidized health insurance program), the Blueprint for Health (which includes a chronic disease management system), health care quality reporting and accountable care organizations (voluntary collaborations between health systems and doctors to help manage care to keep costs down), are sufficient to address the underlying causes of Vermont’s spiraling health care costs.
In order for Vermont to save money and provide better care for patients, Hsiao said the state needs to develop a universal data system that creates physician and patient profiles and implements a uniform claims processing system, and the only sure way to do that is through a state-run universal coverage and single-payer plan.
In Taiwan, administrative costs have been reduced significantly and providers cannot shift costs from one set of patients to another because all of the patients have a single insurer – National Health Insurance — according to Hsiao.
“Where you have a patchwork of providers, you have providers shifting costs, and no country can control inflation (under those circumstances),” Hsiao said.
The Taiwanese system also rooted out provider fraud and abuse because it was able to track the performance of health care providers, along with fees they charged. As a result of these efforts, the country saved 8 percent in health care costs in the first year, Hsiao said. Six to 10 percent of providers abuse the system, he said. The best approach to curbing fraud is by focusing on the few inefficient or abusive providers and “leaving the good performers alone.” Taiwan saw an 8 percent reduction in health care costs when it identified poor performers, according to the economist.
In Canada and England, Hsiao said, these aren’t just theories – these are “proven methods that require single-payer.” “Is that feasible in Vermont?”
Hsiao asked, rhetorically. “We’re trying to find out.”
Hsaio called reform of the health care system’s forms of payment and quality measures is the “third rail” of politics because it requires moving toward a single-payer system. “Obama didn’t dare touch it,” he said. “If you want to be on the vanguard you can show the world how you want to lead the way.”
Mandates requiring Vermonters to participate in a universal plan is also an issue the state will have to grapple with. He pointed to Catamount as an example of the reason why compulsion may be necessary – because 40 percent of eligible, uninsured Vermonters (mainly 18- to 24-year-olds) don’t enroll.
Hsiao’s team, which includes Steve Kappel, a Vermont health care analyst, and Dr. Jonathan Gruber, an economist at MIT who developed health care models used by the Obama administration, will deliver three comprehensive design packages to lawmakers in January, with detailed information about how the systems will work; comparisons of the impacts of each system on cost, insurance coverage and taxes; and a strategy for integrating current reform efforts into a “cohesive system framework.”
“We need to know what is the impact on the health care system itself, the health of the people, the costs, who pays,” Hsiao said. “In any reform, there is redistribution.” We have to ask, he said, “Who should get the benefit?”
Hsiao said the solutions, however, may hit roadblocks, that his team may not have the time – (the project must be finished in less than six months) or the resources (Hsiao is not taking a salary himself and has $300,000 available under his contract with the state to pay his researchers) — to address a number of issues that will likely emerge.
“We’re not designing in an ivory tower,” Hsiao said. “We’ll first understand … what is applicable on the ground and what are some of the major problems and causes.”
Hsiao said several important items would be out of the scope of his project: Negotiations for federal exemptions and waivers, and the impact of the plans on the state’s overall economy.
New changes in the federal rules under the Affordable Care Act and existing regulations under the Employee Retirement Security Act, known as ERISA, which regulates self-insured companies, may be difficult for the state to work around. At this point, lawmakers don’t know whether federal waivers for Medicaid and Medicare and other funds would be available for implementation of one of the three plans.
At one point, Sen. Kevin Mullin, R-Rutland, asked whether Hsiao had taken ERISA into account.
“It’s not forgotten at all – it’s my nightmare,” Hsiao said. “I think I’m going to go back to law school.” He is, he said, consulting with Harvard Law School on how to design a universal system that complies with the law.
Mullin said that in an earlier attempt at health care reform the Legislature came up against resistance from IBM, Vermont’s largest employer, over ERISA. The company didn’t want to have a different kind of insurance in Vermont than it carries for workers in other states, he said, and higher taxes could also drive the corporation away.
“Unless we address these lower priorities, we could be spinning our wheels again,” Mullin said.
Rep. Topper McFaun, R-Barre Town, expressed concern that Hsiao’s proposal didn’t include an analysis of the impact of each plan on the state’s economy.
While the team will be able to provide a comparative analysis of the “strengths and weaknesses of the different options, including their impact” on total cost, tax implications, providers, individuals and businesses, Hsiao placed the overall economic impact of the plans on his lower priority list of tasks. He said the time and expense required to determine, for example, just how many jobs may be lost or gained, how much money might be saved by employers in various sectors or how much money the state would save overall on health care costs is outside the scope of his analysis.
Con Hogan, a member of the state panel, suggested that Hsiao use the Regional Economic Model for a glimpse of what different options might cost or save. The Harvard economist said he would look into it, though he said the modeling is complicated and would be a project unto itself.
Posted in Uncategorized | Tagged Act 128, Dr. Jonathon Gruber, Dr. William Hsiao, Harvard economist, Vermont Health Care Commission | 1 Response