Hsiao and the Chocolate Factory--The Sequel

Recently,  I posted an analysis of the first part of William Hsiao's $300,000.00 report to the Vermont   General Assembly.  Here is the sequel.  Two bills have were introduced in House (H. 202) and Senate (S. 57) on February 8 with the purpose of imposing single payer health care on Vermonters in line with William Hsiao’s recommended Option 3 in a report submitted to the legislature on January 21.  The legislature has embarked upon this plan of completely overhauling our health care system with little or no critique of the Hsiao report. In fact, Hsiao submitted his “final” report on February 17.  Even though the legislature has already placed bills in motion, I will continue my analysis of the Hsiao report and show how it relates to H. 202.     

Hsiao devotes 65 pages of his 184 page report to the legislature outlining three options for government run health care.  Those options, much like the conclusions and background outlined elsewhere in the report, are based on unsubstantiated assumptions, cherry picked data, and formulas that do not hold up under close scrutiny.   Hsiao describes how each option will work, and uses modeling to show savings in health care expenditures as well as the impact of each option on the State’s economy over a 10 year period. The Gruber Microsimulation Model, a model described in my earlier article as so encumbered by unsupported input data, its conclusions cannot be relied upon.  But Hsiao used it anyway to show cost savings presumed to be realized with his single payer system.  He used The Regional Economic Model (REMI), a model generated by Thomson Reuters, a large multinational corporation in the business of selling health care management products to federal and state governments, to show the macro-economic impact of his plan far into the future, even though this model has apparently not been used for health care applications. The REMI model is plagued with the same input/output problems outlined Gruber model above.  Hsiao apparently has little confidence in his own conclusions as he applies a margin of error of + or – 15% to his projections. (This amounts to a margin of error range of $1.5 billion using Hsiao’s assumption that Vermonters spend $5 billion in health care services annually.)  The margin of error far exceeds the amount of savings projected by Hsiao.

I will focus on Hsiao’s third option since that is the one he concludes is most suitable for Vermont.  It is a single payer option.  It is also the option that appears to be incorporated in H. 202. which is, of course, no surprise because the legislature made it clear in Act 128 passed last year that it wanted a single payer system. Act 128 did not allow for the development of an option fostering better quality and access to health care through reforms that do not involve more government control. 

According to the Hsiao option, an independent board is to be appointed by the governor. H. 202 says that it shall be a 5 member board to be known as the Health Care Reform Board.  Its responsibilities are substantial and include the following:

• To represent all major players including employers, state government, consumers, and all recipients of benefits and payments.
• To set payment rates for providers (physicians, hospitals, other providers) 
• Negotiate updates/changes and scope of benefit packages (including co-payment levels).
• Negotiate contracts for claims administration.  (This is the one area where Hsiao acknowledges that competition through competitive bidding will work to reduce costs.)
• Establish global budget annually for Green Mountain Care, subject to legislative approval.

Given this set of responsibilities, this board is going to have enormous power to control the funding for our health care system, and to control the types and levels of care available to Vermonters.   

The following are some of the questions we consumers of health care should be asking.

How will Green Mountain Care be funded? Hsiao recommends that it be funded with a payroll tax at the level of 3.6% for employees up to $106,000 in income and 10.9% for employers. Hsiao recommends that employees earning less than 200% of the federal poverty level (FPL) be exempted from the payroll tax.  H. 202 does not specify how it is to be funded, but simply suggests that funding will have to come from some form of new tax on Vermonters. In addition, both Hsiao and H. 202 assume higher levels of payment reimbursements from the federal government for Medicaid, certainly not a foregone conclusion.  Co-payments by health care consumers will also contribute to funding.  Hsiao recommends a 13% co-payment while H. 202 is not specific.

What will my benefit package include under Green Mountain Care?  Hsiao recommends that a benefit package design should be equivalent to the average of plans currently available in Vermont.  Both Hsiao and H. 202 indicate that the 5 member Health Care Reform Board will have authority to design and alter the package with legislative approval. .  Of course, the benefit package will depend on how much funding is available, and how “sustainable” that funding is.  Look for reduced benefit packages in the near future when the legislature finds out its cost estimates did not reflect reality. 

Will my health care be free?  No.  In addition to the payroll tax, you will be subject co-payments, the level of which will also be determined by the Health Care Reform Board.  Also, Vermonters will need to purchase additional insurance depending upon the scope of the state’s “basic benefits” package.  There is no estimate in Hsiao’s report as to the cost of this insurance.    

Will I be denied access to costly health care treatment?  Yes.  The purpose of the Hsiao and legislative proposals is to reduce cost. Imaging technology, organ transplants, cancer treatments are all expensive. Expect to see those services limited for certain classes of people based upon yet to be determined criteria that will likely include age and/or the degree to which a disease has advanced.  Also, under “global budgeting”, accountable care organizations will have a fixed budget to be allocated among all patients within that organization, a built in incentive for providers to avoid costly treatment.   

Will I be permitted to take advantage of out-of-state health care providers?   The Hsiao report suggests that there should be negative incentives built into the State’s accountable care organizations to discourage going outside of Vermont’s borders.  H. 202 simply says that cross border issues will need to be addressed without offering any specifics. The legislature has essentially kicked the can down the road to avoid the controversy that will be generated when Vermonters realize they will not be able to afford treatment at Dartmouth Hitchcock, for example, under the new health care regime.

Will I be able to choose my primary care physician?   H.202 suggests that you may not be able to do so because you will be “attributed” to a particular accountable care organization. .  The Health Care Reform Board will decide which accountable care organization you will belong to.

Will I need to purchase additional health insurance?  H. 202 implies that many people will want to purchase a wrap around policy to cover care not included in the Green Mountain Care benefit package.   The Hsiao Report strongly indicates the need for wrap around policies to be provided by private insurers.

Will Catamount Health continue to be an option?  No.  The Hsiao Report identifies this program as one of those state-run programs that is unsustainable.  H. 202 proposes to eliminate Catamount Health and fold it into the Medicaid-funded Vermont Health Access Plan (VHAP). Physicians are compensated at a lower rate under VHAP and may opt not to accept patients previously enrolled in the Catamount plan.

 

Will long term care be provided under Green Mountain Care?  No.  Hsiao recommends that it not be included and H. 202 does not address it.

The Vermont General Assembly is proposing to ram through a bill that would turn one sixth of our economy over to government control, put a government panel in charge of our health care decisions, limit our freedom of choice and substantially raise taxes, all based on a badly flawed report with a pre determined conclusion.   We as health care consumers, taxpayers and citizens should be asking our legislature these and other questions.  

In the next article I will outline the alternatives to government controlled single payer health care.