Vermont’s All Payer Waiver: Final Thoughts and Implications

Part 3 in a 3 part series

by Matthew Strong

Who pays the difference?

If Montpelier officials are successful in obtaining an All Payer Waiver for Medicare, they will have the power to set reimbursement rates for health care providers. Most likely, they will increase reimbursement rates to offset the “cost shift” to private insurance. Currently, health care providers lose money providing Medicare and Medicaid services and have to charge more to other payers to make up the difference. Under the new system, where will that money come from?

Governor Shumlin made some attempt to deal with the cost shift in the last legislative session, calling for “a 0.7 percent payroll tax (for Medicaid) that would be theoretically offset by reductions in (health insurance) premium growth for businesses and individuals. The $90 million tax, the administration claimed, would generate premium savings of 5 percent.”  The expected results were questionable, the idea of a payroll tax was highly unpopular, and the scheme died on the vine.

Now, in the wake of the single payer flame out, with the cost shift mounting, and state tax payers pockets getting close to empty, Montpelier is seeking an All Payer Waiver – and with it, they hope, access to more federal funds.

The only other state with an All Payer Waiver of any kind is Maryland. Under their waiver, the residents of Maryland receive federal funding beyond what other states receive as Maryland is considered a “demonstration project.”  Maryland uses this windfall – the burden of which is paid for by taxpayers across the nation — to offset their cost shift. (Have you ever noticed how the federal portion of taxes removed from your paycheck is larger than the state portion?) In this case, Maryland is causing an increase in the federal portion of your taxes. Vermont wants to get in on this deal — on the receiving end.

Here’s the catch… Maryland has been flying pretty much under the radar since 1977. They also have a certain amount of protection due to geographical proximity to the D.C. establishment. Very few people outside of Maryland were paying much attention to the “demonstration project”. But how will other states react if they see other places like Vermont start digging into the federal trough? Once other states realize some states are getting special treatment (and cash) they will start demanding it for themselves, which, of course, would lead to a collapse of the system.

What does it mean for VT and our “local control?”

The GMCB and the Shumlin administration will have to walk a fine line when negotiating with Medicare for too much or too little extra funds. If they get approved for the waiver, and ask for dramatically higher reimbursement rates (15-30% increase as evidenced by the payment reform director’s own presentation before the house healthcare committee, which is what it would take for doctors and hospitals to receive fair compensation for Medicare and Medicaid Services), it will garner significant national media attention. This will cause other states to ask why they aren’t receiving more federal dollars as well. In the current climate regarding sky-rocketing premiums for Medicare in the midst of the Obamacare bungle, Medicare will not have any leeway to give Vermont more while other states do without, and this dynamic would likely shut the whole thing down.

However, if Vermont asks for too little it won’t make much of a difference to health providers or patients paying the bills. There is so much pent up demand in the healthcare system due to low reimbursement rates, any uptick will be swallowed up before it gets to the people who matter most: actual health care providers. There are new facilities to build and old ones to maintain, new equipment and technology to purchase and integrate, more administrators to hire, staff trainings, raises promised long ago, etc.

In order to justify increasing any funds for Vermont (essentially a bail out), the federal Medicare administration is going to want to see “savings.” This will put further pressure on doctors and hospitals to cut costs, which could result in less time with patients, more time filling out paperwork, and attempting to perform tasks faster. A 2010 Report from the Office of Inspector General for Health and Human Services estimated there are already 180,000 deaths each year (15,000/month) from medical malpractice in Medicare related medical care.  Trying to get hospitals to do things faster and trying to force doctors and nurses to do more with less is a recipe for further disaster.

Proponents of the waiver will float the idea that the state setting the reimbursement rates for the federal Medicare program could be considered an advance for local control at the state level. However, as far as local control goes, the concept of a federally collected tax, administered by a federal behemoth bureaucracy, with rates set by unelected bureaucrats, is about as far from local as you can get.

What does it mean for doctor shortages?

A doctor shortage, particularly in the primary care arena, is a national issue, and Vermont is also facing a future without enough doctors. On top of this, the 2015 Medscape Physician Lifestyle Survey reported an extremely high burnout rate (physicians reporting extreme stress, exhaustion, being overwhelmed, work/personal life imbalance, etc.), – 46% of physicians, up from 39.8% in the 2013 survey.

The prospect of increased reimbursements would normally be an incentive for doctors to stay. But, with increased pressure on doctors and hospitals to save money, and more paperwork to prove it, the reason why doctors get into the profession and stay there is quickly disappearing.

Most medical providers get into the industry because they want to help people, they have a gift or natural proclivity for the subject material, and they believe the long years of study and school debt incurred will eventually be rewarded with a substantial income commensurate with their sacrifice to accomplish their goals. However, the job has become increasingly stressful and less rewarding.

A recent survey determined 47% of doctors are spending between 5 and 25 hours on paperwork/administrative duties per week, with 13% of that group spending more than 25 hours a week on paperwork and administration. Only 54% of the 24,000 doctors surveyed would choose medicine as a career if they had to do it all over again, and only 23% would choose the same “practice setting”.

Two quotes from this survey put even further detail on the situation. “My income is 60% of what it was 10 years ago, and I’m doing more work.” And, “the regulatory environment and the onerous paperwork are making the current situation untenable”. Put another way, if you wanted to be a diesel mechanic because you loved working on large trucks, but after all the training and finding a place to work, you were required to crochet mittens for 5-25 hours a week on top of a full work week while your boss looked over your shoulder and critiqued every stitch, you might not have the best job satisfaction either.

Any increase in Medicare (and Medicaid) that is less than astronomical will only be absorbed by everyone between the taxpayer and the doctor. The ones holding the bag will be the taxpayers (with increased taxes, increased premiums, and more health risks associated with longer wait times and more medical errors), and health care providers (with more pressure, less time with patients, and less income for their time). And they still won’t see each other as much as they would like, and that’s the real shame.

{ 2 comments… read them below or add one }

Jim Bulmer November 7, 2015 at 1:59 pm

Curious to know how many doctors have retired or left their practice in Vermont and how many new doctors are locating here. Bottom line – what is the net number of practicing doctors in Vermont in 2015 vs 2005?


Ralph Colin November 7, 2015 at 7:42 pm

Ah, but what you overlook is the fact that Vermont is ALREADY a “demonstration project.” What are we demonstrating?

We are a clear case of what happens when the inmates are allowed to run the asylum!


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