MONTPELIER — An independent report presented to lawmakers Thursday has found that the savings estimated by the Shumlin administration for its proposed single-payer health care plan may have been overstated.
As his administration works to fix the troubled Vermont Health Connect website that launched Oct. 1, Gov. Peter Shumlin and his health care team are working behind the scenes to craft a universal, near single-payer system for the state that he hopes to launch in 2017.
But the administration’s early projections of cost savings, part of a report completed earlier this year for the administration by the University of Massachusetts, may be overstated, according to Avalere Health LLC, a Washington, D.C., firm. Avalere was commissioned by Vermont Partners for Health Care Reform, a collection of health and business organizations.
Avalere reviewed the UMass report, which has projected the need for $1.6 billion in revenue beginning in 2017 to fund Green Mountain Care, Shumlin’s proposed universal health care system.
The analysis, presented by two of the Avalere report’s authors Thursday to the Joint Health Care Oversight Committee, found areas of concern in the assumptions being used by the University of Massachusetts and the administration, though.
The Shumlin administration, based on the UMass report, used projections that may not hold up, according to Avalere, which it said could bring the revenue needed to $2.2 billion.
“What we found … were a couple of assumptions that were valid at this point, but if you kind of start looking at them and pulling them apart a little bit you start to stop and question things a little bit,” said Eric Hammelman, who presented the report alongside his colleague Bob Atlas, a vice president with the firm.
The administration projects an average payment to providers for services under the future Green Mountain Care to be, on average, 105 percent of Medicare rates. Currently doctors are paid at about 122 percent of Medicare, Hammelman said, who despite offering critiques Thursday said he was “very impressed” with the UMass study.
Under Green Mountain Care, average payment to providers is more likely to be 103 percent relative to Medicare, according to Avalere.
That much of a reduction could discourage doctors from practicing in the state, Atlas said.
“From our discussion with physicians, we do believe that there’s a risk that they will see Vermont as a challenging environment to continue to practice,” he said.
Meanwhile, the administration is relying on significant administrative savings under Green Mountain Care to bring down overall health care spending in Vermont. But Avalere found the administration may be projecting too rosy a scenario in terms of available savings.
The administration assumes the overall administrative costs for delivering health care insurance in Vermont will be about 12 percent in 2017. It believes Green Mountain Care would lower that to 7 percent.
The Avalere report, however, found that the state’s largest insurance carrier, Blue Cross Blue Shield of Vermont, is already delivering insurance at an administrative cost below the projected 7 percent under the proposed health care plan.
“The average in the state has already dropped to about 6.7 percent,” Atlas said. “What we worry about is the assumption that the savings from the administrative costs will not necessarily be there, relative especially to Blue Cross of Vermont, which has already dropped to below a 5 percent administrative cost.”
Avalere also raised concerns that providers would still need to process insurance for out-of-state patients receiving care in Vermont and patients whose employers continue to provide them insurance. That could eat into administrative savings.
Additionally, many already cash-strapped hospitals could also see a significant reduction in payment for health care services provided, according to Avalere.
All of those factors could raise the price tag significantly over what the administration has projected.
“You could be looked at upwards of $450 million in increase,” Atlas said.
Robin Lunge, the administration’s director of health care reform, said the administration does not agree with Avalere’s methodology in determining provider payment rates or the calculation of administrative savings. For instance, she said the administration believes the current payment to providers, on average, is 107 percent, much closer to the 105 percent it has projected under Green Mountain Care.
“I think there will be debates about the most appropriate methodology, and we welcome having that discussion,” she said.
Lunge said the Avalere report, if correct, still shows that the state can deliver health care to more Vermonters for less than the current delivery system.
“Even using their numbers, quite frankly, it shows that we can move to Green Mountain Care, cover all Vermonters with a better benefit on average than people have today, for the same or lower costs. So, quite frankly, I think the Avalere report, even with their assumptions, confirms that basic premise,” she told reporters after Avalere presented its report.
Lunge said the Shumlin administration will continue working with providers and others to set up Green Mountain Care.
“I think we need further discussion around the details so that we can come to a consensus number,” she said.
Vermont Partners for Health Care Reform includes Fletcher Allen Health Care, the Vermont Association of Hospitals and Health Systems, the Vermont Medical Society, the Vermont Business Roundtable, the Vermont Chamber of Commerce, the Vermont Assembly of Home Health and Hospice Agencies, and Blue Cross Blue Shield.
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