Catamount Health Becomes a Reality

Dr

Catamount Health Becomes a Reality

Governor and Legislature hash out compromise on health care

by Art Edelstein

Doctor Deb Richter and John McClaughry have about as much in common
philosophically as do two baseball fans, one a Red Sox booster the other a die-hard Yankee, as they discuss their respective team’s chances for the pennant.

However, these two thoughtful Vermonters, Richter a proponent of single payer
health care, McClaughry a proponent of the market place and a choice of many
private insurers to choose from, agree on one thing. The recently passed
Catamount Health Care plan hammered out and agreed upon May 10 in the
waning hours of this year’s legislative session is, in McClaughry’s words “crap.”

McClaughry, the voice of the Kirby based conservative think tank Ethan Allen
Institute wrote in an article published in March that the then-proposed Catamount
Health was actually the “Spawn of Green Mountain Health.” That was last year’s
failed attempt by the Democratic controlled Legislature to institute a single-payer
health care system in Vermont. Governor Jim Douglas vetoed GMH.

Richter has an equally jaundiced view.

“This Catamount bill does a lot for a few, at the expense of making the rest of us
wait for rising premiums,” said Richter, a family practitioner in Cambridge.

She has serious reservations about the legislation.

“This bill does not control overall costs. It’s a myth that by partially implementing
some disease management program of chronic disease that you will control
overall costs. Most service health costs are fixed.”

According to Richter and McClaughry, watching the Legislature and the governor
parry in early May as they tried to come up with some health care bill
compromise they could both live with was like watching a second baseman and
a center fielder wave each other off for a pop fly just beyond the keystone bag.
Both want to catch the ball but neither wanted to give any ground.

So it was with the two branches of government. It was obvious that no health
care deal would look very bad on the resume of this Legislature, whose main
selling point for election in 2004 was health care reform. As for the two-term
governor, no signed health care bill would have made him look obstructionist,
this, too, a low mark for a politician seeking a third term at the helm of Vermont
government.

Richter expressed a view that many in the single-payer camp would have agreed
with. “I think it’s wise for Douglas to veto this, it’s a bad bill,” she said just a few
days before the compromise was reached that led to the signing of the bill. She
thinks that with Catamount Health now law, “this (will end) the debate over health
care reform.”

That’s a scenario she does not want to see.

Richter said that should the bill have been vetoed, her side would have “to get it
done next year and do a better job.” The only way to institute a single payer plan,
in her words “is to get a new governor.”

Also agreeing with Richter was Con Hogan a former Secretary of Health and
Human Services in the Dean administration and a former gubernatorial
candidate.

“I don’t think it’s worth having, (Catamount Health) it will make things worse.”

According to Hogan - who appeared with the likely Democratic candidate for
governor Scudder Parker at a press conference a few days before the bill was
signed, where they touted Parker’s health care vision – a large part of the plan’s
emphasis, cannot be reached.

“The number of people becoming uninsured is rising faster than they can cover
them,” he explained. “The price tag of health care is going up so fast companies
are backing out, people are not doing it and deductibles are getting so high. So
Catamount would only be an expensive Band-aid.”

The Ins and Outs of this Session’s Health Care Legislation

H. 861 created a new health program for the uninsured called Catamount Health.
It is intended, in part, to stem the cost of health care in the state.

Janet Ancel (D-Calais), a member of the House Ways and Means committee
was on the health care committee both years. She helped Vermont Business
Magazine wade through the legislation.

In a prepared statement she said the legislation would accomplish the following:
“Uninsured Vermonters will get access to affordable, comprehensive health care
coverage. Insured Vermonters will get premium relief by reducing the cost shift.
Health care providers will get paid to keep people well, not just for treating
disease.

“Vermonters with chronic conditions will get the care they need at the time they
need it. Those Vermont businesses not paying their fair share of health care
costs will be expected to contribute.”

Currently it is expected that Vermonters will spend $3.5 billion this year on health
care, which is nearly $5,500 per person. One of the bill’s funding mechanisms is
a fee assessed on employers who don't offer insurance to their workers.

That fee, a bone of contention among some employers, is $365 per uninsured
worker. Also funding the plan will be a rise in taxes, on cigarettes, little cigars and
smokeless tobacco beginning October 1.

A second bill, S. 310, is an assortment of "common sense initiatives" such as
allowing insurance companies to offer discounts for healthful lifestyles; requiring
hospitals, insurers and doctors to simplify claims forms; and promotion of
information technology in health care.

Few disagree with S.310’s objectives but the provisions in H. 861 are another
issue. There is debate over what it accomplishes and how it will be funded.

Ancel said the focus of the H. 861 is affordability. She stated that the primary
goal is to cover the uninsured in Vermont and this legislation establishes a
comprehensive benefit and a standard of what should go into the benefit.

The bill provides first dollar coverage (no deductible) for chronic care
management, and preventive care. It also sets a dollar figure for out of pocket
expenses, co-pays and other deductibles. A key aspect of the bill is that, unlike
high-deductible catastrophic plans, the coverage will pay for primary and
preventive care. The bill is also broad and acknowledged by many as far seeing
in that it establishes programs to manage chronic care delivery.

Reimbursement to providers in Catamount Health is set at 110 percent of cost.
Currently Medicaid reimburses at a figure under 100 percent, as does Medicare.
Private insurance reimburse at 145 percent of cost.

Catamount Health, Ancel explained, will address the cost shift that is plaguing
Vermont because of under reimbursement by Medicaid. However, she noted,
“It’s less expensive than private insurance because we don’t reimburse at 145
percent as they do.”

Catamount Health should be a less expensive product, noted Ancel. The
insurance will also cover a healthier demographic of younger people who,
currently are often uninsured. These uninsured, when they can obtain health
insurance according to the thinking behind the bill, tend to be a healthier
segment of the demographic pool and should keep rates low.

Catamount Health is structured as a product offered in the private market and to
this end both Blue Cross/Blue Shield of Vermont and MVP, the state’s two
current main insurers have both indicated, “they are eager to be in this market if
we can make it work through the private market,” said Ancel.

The sticking point in Governor Douglas’ signing of the legislation was what would
happen if BC/BS and MVP couldn’t make the numbers work. The governor and
the legislature, said Ancel, ended up with a compromise where after two years, if
the private market could not sustain the plan the state would have the authority
to require them to offer it.

According to Ancel, after two years of the mandated situation, the health care
commission “will look at where we are and make a decision as to whether this
way is cost effective.” Only then, she added, would the state look at the self-insured model. She said that none of the plans discussed this session ever had
the state administering the health plan.

Catamount Health will subsidize only those uninsured whose income is below
300 percent of the federal poverty level. Under this legislation there are defined
income levels that will be reflected in how much those insured by the plan will be
expected to pay.

This is not a mandated program for all Vermonters currently without insurance,
Ancel emphasized. However, if by 2010 96 percent are not insured the state will
have to consider an individual mandate.

One hundred percent coverage of Vermonters for health care is an unrealistic
figure according to those interviewed for this article. No program including
Medicare, said Ancel, has 100 percent coverage. The committee that wrote the
House bill expects that 30,000 Vermonters won’t be covered by Catamount
Health. Some children will be covered by other programs, some citizens will opt
out for religious reasons and some, primarily those in their 20s simply will not
avail themselves of the coverage.

However, said Ancel, adding 25,000 to 30,000 people to the insured rolls gets
the state to 95 percent covered, which she said was, “pretty good.”

The bill has a provision for revisiting coverage figures in 2011 at which time the
health care commission will look at the option of mandatory insurance should an
unacceptably low number of people be enrolled in private insurance or
Catamount Health.

There are provisions in the legislation for those over 300 percent of the poverty
level to sign up for insurance but they will pay a monthly premium that will be
essentially discounted.

This is because of the expected lower demographic of those who sign up and
the cost of the plan should be less expensive than other available health
insurance.

Currently about 61,000 Vermonters are uninsured and this is about 10 percent of
the population. This figure is enough to cause cost shifting as these people’s
health care expenses are borne by the rest of the population in higher premiums
and higher costs to hospitals.

Catamount Health will begin October 1, 2007. The employer assessment will
begin April 1, 2007.

The Business Viewpoint

The legislation is not without its detractors, primarily those representing the
business community. Those in the health community generally support the
legislation.

Many in the business community have strong reservations about the $365 per
employee fee assessment that will partially fund the program.

“We don’t know how the employer assessment will affect our local economy,”
said Mary Sprayregen, Director of Government Affairs at Lake Champlain
Chamber of Commerce. “Will it will have a greater impact on the tourism industry
hotels and motels, with their disproportionate share of part timers?”

According to her, it’s uncommon for the hospitality industry to offer health care to
seasonal and part time employees. That industry, it is feared, may pay a large
share of the employer assessment, said Sprayregen. Right now there are no firm
numbers.

Sprayregen applauds the focus on chronic disease management, which she
called, “a great first step.” The increases in Medicaid reimbursement to providers
she saw as a hopeful way to decreases the cost shift problem.

“The problem with Catamount Health is parts of it nobody is paying attention to,”
said William Shouldice a Montpelier lobbyist representing several local business
associations. According to him, “the governor is afraid of another baby Medicaid
program with a possible $200 million deficit by 2010, and this plan if not priced
right and funded carefully exacerbates that problem.”

He sees the $365 assessment not addressing the problem of having too many
uninsured. “There are all sorts of reasons people don’t take insurance,” he
noted. “The problem is people think for $365 per year per employee the
employee can go get health insurance from Catamount Health, but they will have
to pay for it. The money doesn’t give them health insurance.”

"I don't think they have the slightest idea what the $365 assessment does to
small business," charged Shouldice.He categorized Catamount Health as “all
window dressing.” He is not satisfied with the way the plan will be funded. “There
will be more taxes or more premiums down the road, this doesn’t fix anything.”

Shouldice said, “We are trying to fix this (health care problem) for 10 percent of
the people, some who are eligible for Medicare and the rest are young and think
they are invincible and that’s why they don’t have it.”

He saw the legislation and the cost of running it as “going back into the cost of
doing business. Most businesses are already trying to do the right thing.”
Shouldice would have been pleased had Governor Douglas vetoed the bill.

“We don’t think it goes to solving any of the problems associated with the high
cost of health care,” said Vicky Tebbetts at the Vermont State Chamber of
Commerce. The biggest concern, she said, was the employer head tax. She saw
the $365 assessment for uninsured employees costing some businesses
between $10,000 and $70,000 annually. “Some employers don’t necessarily
offer insurance to all employees,” she said of the current status of health care
and business.

“We’re disappointed that the Legislature has spent two years addressing health
care reform and they focused on a plan that represents three percent of the
population,” Tebbetts complained. “We would have rather seen a larger focus on
cost containment and true health care reform for all.”

"It is just a big albatross around our necks," said William Driscoll, vice president
of Associated Industries of Vermont, the state’s manufacturing association. He
said the employer tax would weigh heavily on business. “There isn’t a sufficient
understanding as whether the tax is on part time employees and how much it will
cost up front,” he offered. “Small companies may not be able to afford to offer
health insurance.”

According to Driscoll, the state has “given away this basic principle to tax
employers for publicly funded health care.”

He explained the AIV position this way: “With the principle of expanding public
funding health care you are losing the connection between what is consumed
versus what things cost. We don’t want to move to single payer, that would be an
economic disaster for the state.”

Driscoll said one way to reduce the economic burden is to look at mandatory
coverage for items and look at community rating which he feels is a distortion of
health care costs. He, along with many others, would like malpractice reform as
a way to lower health costs, and an increase in consumer education on health
cost issues.

Ancel addressed business’ concern about the $365 per annum assessment.
First, she said, the assessment is on full time equivalents. There are three
categories of full time equivalents: all employees of employers who don’t offer
any employee insurances, second, full time equivalents of employers offering
insurance but not to that particular employee, and finally, employers who offer
insurance but the eligible employee opts not to take the offer and is not covered
by a spouse’s.

There are exemptions for the first eight full time employees and employers do
not pay any assessment until the ninth FTE is reached. This takes effect in the
first two years starting 2007-2008. In 2009 six FTEs are exempt and in 2010 four
are exempt. She called this “a phased in program and even then very small
employers are exempt.”

Typically, said Ancel, “It’s the very small employers with five or fewer employees
who don’t offer any insurance at all. They shouldn’t have to pay at all.”

Con Hogan, the single payer advocate, has problems with Catamount Health.

According to him, the Legislature “did nothing in the bill to control short term cost
increases. They put their eggs in the chronic care basket.”

Savings here, he contents, “won’t be seen for five to 10 years.” In that time, he
predicts, with the rate of cost increases “we’ll have 100,000 uninsured, a 40
percent increase. That’s the equivalent of all the citizens in Lamoille and
Washington counties!”

Hogan, who ran as an independent candidate for governor against Jim Douglas
four years ago, said the Legislature “was pushed into this by Douglas’s refusal
after his quick veto of their efforts a year ago.”

Hogan, like Richter, believes that “unless the executive branch leads firmly on
something as big and complex as this nothing of substance is going to happen.”

But Hogan sides with business on the issue of the burden of paying for health
care insurance. He sees the continued rise in costs as “an ever increasing
burden falling primarily on business and their employees. It should not be
business’ responsibility alone to pay for this system.”

Others support the legislation. The Vermont Medical Society according to its
president Paul Harrington likes the plan.

“It provides a new low cost health insurance option in the private sector for
uninsured Vermonters,” he said.

Harrington does not see the $365 assessment as overwhelming to business.
Rather, he called this, “a modest sum to pay for those workers who don’t have
insurance.”

Spence Putnam at Vermont Businesses for Social Responsibility, a 640-
member business association representing over 30,000 workers or
approximately eight to 10 percent of the state’s workforce, also wants health care
coverage separated from employment.

“We’re pleased to see progress and think it’s important to move forward but
Catamount Health falls far short of what we advocate.”

Putnam does not want employees to lose health care if they lose their job and
does not want employers to be in the business of engaging in securing health
insurance, which he does not see as “a core business activity.”

VBSR thinks it’s critical to have as large a pool of insured as possible. “Health
care should be a shared risk pool and not fragmented,” said Putnam. He faults
Catamount Health for its emphasis on trying to insure younger Vermonters. “The
ideal is all Vermonters in a single pool all covered, not for example 20 year olds
in a separate pool,” he explained. “We want to make sure that everybody pays
for that coverage according to their ability to pay.”

Other concerns about the legislation arose in interviews with the business
community. Typically, there was concern that people without health insurance
would flock to the state to purchase the expected low cost plan. Also expressed
was the perceived flaw in raising tobacco taxes, which would become a
diminishing source of revenue as less and less people smoke.

Finally, there is the concern over whether employers would drop health
insurance en masse as they saw the new health plan as a way out of constantly
rising health insurance costs.

Ancel said these concerns were addressed by legislators when they wrote the
bill.

As to over utilization and an out-of-state influx of the uninsured, Ancel said that
concern previously surfaced with civil unions and later with VHAP expansion but
has never materialized. “It didn’t happen and I don’t believe it will happen here,”
predicted Ancel.

“People make a decision as to where to live for a great many reasons. The
weather and types of jobs will have an effect.”

The legislation contains a 12-month waiting period before anyone can enroll in
Catamount Health and there is a family income cutoff of around $60,000 for a
family of four. The cutoff is approximately $29,000 for an individual.

The Calais legislator said the issue of the tax on cigarettes and the concern that
smokers will buy their smokes out of state had also been considered.

“They don’t go to New York or Massachusetts now, but there is some softness at
the New Hampshire border where they keep their taxes low,” she acknowledged.
What the legislation does do is require people who buy cigarettes over the
Internet to pay the tax.

The fact that a cigarette tax is a declining source of revenue is built into the
model, said Ancel. According to that spreadsheet, projections up to 2014 show
there is sufficient money to fund the expenditures.

Ancel addressed business’ concerns about the $365 per annum assessment on
business. First, she said, the assessment is on full time equivalents. Further,
there are exemptions for the first eight full time employees and employers do not
pay any assessment until the ninth FTE is reached.

Ancel said the third concern that employers would drop health insurance is not a
reasonable concern. According to her, “the assessment is not a way for
employers to buy cheap insurance for their employees. It’s a way of financing the
program not of purchasing employee insurance.”

On the moral level she does not think Vermont employers are that cynical.

“Most employers are not going to leave their employees without insurance for 12
months before they can apply for Catamount Health,” she said.

She, like Hogan, sees employers dropping insurance because of affordability
issues.

“This bill, we hope, slows employers leaving the insurance market. In the way the
bill addresses the cost shift.”

The financial model for this legislation, said Ancel, takes into account a certain
amount of crowd out (employers dropping insurance.) “We assume some of that
will happen.”

The health care commission created by the legislation will monitor this potential
problem and will cap enrollment in Catamount Health if in any year expenditures
are projected to exceed the amount appropriated.

“We built in a lot of protections,” Ancel acknowledged.”

Answering the negatives voiced by McClaughry, Richter and others, Ancel was
philosophical. “There is something for everybody to hate in this bill although I
think it’s a really good bill, which means it passes the test.”

Art Edelstein is a freelance writer from East Calais.