coat of arms Governor's Bipartisan Commission
On Health Care Availability & Affordability
Final Report - December 4, 2001

Table of Contents


Letter of Transmittal

December 4, 2001

Governor Howard Dean, MD
President Pro-Tem of the Senate, Peter Shumlin
Speaker of the House of Representatives, Walter Freed


Last January, The Governor's Bipartisan Commission on Health Care Availability and Affordability was created by executive order.

By gubernatorial and legislative appointment, our commission has consisted of Senators Nancy I. Chard and Cheryl P. Rivers; State Representatives Frank M. Mazur and Thomas F. Koch; Human Services Secretary Jane Kitchel; Banking, Insurance, Securities and Health Care Administration (BISHCA) Commissioner Elizabeth Costle; and myself. (Senator Rivers served until her resignation from the Senate in October; please see Footnote 2 of the report.)

We were asked

    1. To study data and information relative to increasing health care costs, cost shift, and availability of services.

    2. To talk with employers and others concerned with rising health care costs and access to health care.

    3. To identify ways we can achieve the dual goals of controlling costs and guaranteeing universal health care access.

    4. To report to report back to you on our findings and our recommended approaches to address these problems.

We have now completed our work and we respectfully submit herewith our report.

In pursuing this work, we held 16 regular commission meetings and numerous other hearings and meetings (including some on Vermont Interactive Television) to obtain testimony from care and coverage professionals, from employers, employees and their advocates, from consumers and their advocates, and from the general public.

We have been briefed on numerous occasions by representatives from BISHCA, the Joint Fiscal Office, The Commission on the Public's Health Care Values and Priorities, The Lewin Group, and other organizations.

We have received on-line testimony from more than 180 persons and organizations and have posted extensive excerpts from each on our website. This has created something of a dialogue, as early testimony has often been endorsed or rebutted by subsequent submissions.

We also have posted drafts and revisions of an extensive "problem statement" and of numerous "solution statements" offered by members of the commission and of the public. These documents have been useful in articulating problems, presenting arguments, eliciting further testimony and generally helping us to focus our discussions.

The intelligence and scope of the testimony and solution statements we have received has been extraordinary, and we appreciate the help of the several hundred people involved.

We thank you for the opportunity to serve Vermont. We present this report with the hope that it will be of use to the Legislature in the difficult deliberations that lie ahead.


Cornelius Hogan



The commission agrees:

A. All Vermonters have a compelling personal interest in having physical and affordable access to the information and preventive care necessary to allow them to lead healthy lives.

B. Because we each can expect to face illness and injury at some point in our lives, all Vermonters have a compelling personal interest in having physical and affordable access to top-quality comprehensive health care.

C. Vermonters who do not get medical care because of physical or financial access problems are more likely

D. Vermonters, through their government, therefore collectively have a compelling interest in ensuring that everyone is well-informed about health care matters and has ready and affordable access to top-quality comprehensive health care. In addition to and beyond any moral obligation, this collective, compelling interest is practical and financial in nature. SEE NOTE 1


I. Authority, Scope

A. On January 24, 2001, Governor Howard Dean issued an executive order establishing a Special Governor's Bipartisan Commission on Health Care Availability and Affordability.

B. The Governor asked the group

C. Early in our deliberations, the commission decided not to address directly the issues involved in Long Term Care, not because we believed them to be any less important than the issues we do address here, but because they are of such magnitude that we could not do justice to them with the time and resources we had available to us. This agreement was not unanimous and was arrived at reluctantly, but was deemed necessary by the majority.

D. We include in this report a letter to the Vermont Congressional Delegation outlining problems with health care availability and affordability that we believe cannot be solved except at the federal level.

E. We also include a letter of concurrence from Representative Koch and a minority report from Representative Mazur.


II. Introduction

A. Our commission is made up of people who have spent years listening to testimony and otherwise studying the problems of health care availability and affordability. We have differences, some of them passionate differences, in our political philosophies, and it should come as no surprise that we differ on some of the directions reform should take. Although we have taken a substantial amount of new testimony during the past nine months, our real task has been to try to find common recommendations, despite our philosophical differences. SEE NOTE 3

B. Based on what we have learned, we do agree on this: Health care in Vermont is near a state of crisis -- some of us would say it is already in crisis -- and all health care sectors are on edge. We also note that many of these problems are national or even global in scope and that our abilities to solve them at the state level are limited.

C. Health care costs in Vermont, now exceeding $2 billion a year, are of a sufficient magnitude, however, and are increasing at a sufficient rate to place state government itself in jeopardy, including every program for which it appropriates money. By comparison, Vermonters budgeted $1.8 billion for all state government services in FY 2001 (not including federal funds). SEE NOTE 4

We are rapidly approaching the point at which these costs will directly conflict with our ability to do such things as to maintain roads and bridges, for example, or to provide cost-effective services to our infants and children, to promote agriculture and tourism, or to provide any other services our citizens have come to expect.

D. We do not have a health care system in Vermont. SEE NOTE 5 That means:

E. This commission does not recommend the Single Payer option, even though we have been told by The Lewin Group that it could cover all Vermonters, including more than 51,000 currently uninsured, for 5 percent less than what we are collectively paying now. SEE NOTE 7 Some of our opposition is on philosophical grounds, but in practical terms, we reject that option for a variety of reasons, including:

F. In the alternative, we have proposed a number of initiatives that would collectively address many of the problems of health care availability and affordability. Among our recommendations are measures

G. We also recommend that the Legislature take greater responsibility for ensuring the availability and affordability of health care in Vermont. SEE NOTE 8

H. We recognize that many of the availability and affordability problems in Vermont require federal solutions, SEE NOTE 9 and we include with this report a letter to our Congressional Delegation with recommendations for federal action.

I. This commission is united in our belief that decisive action must be taken by the Legislature in the immediate future, and that new and unprecedented ways of approaching the challenge, including those presented here, must be given careful consideration.


III. Context of the Problems

This outline is presented as a frame of reference for the problems we identify and the recommendations we present elsewhere in this report. We understand that is not a complete treatment of the subject, but we offer it as a guide to understanding the context of our discussions.

A. By conventional measures, the quality of health care in Vermont is considered to be good.

B. The health care economic sector in Vermont, now exceeding $2 billion, has grown to a size comparable to the size of state government; SEE NOTE 10 unlike state government, however, its spending decisions are not legislated or subject to gubernatorial veto or similar consequences, nor are they subject to public stewardship controls such as the state government's Capital Debt Affordability Advisory Committee.

C. Vermont provides government coverage intended to be sufficient to ensure financial access to health care for children, pregnant women, and new mothers.

D. Vermont ranks among the highest in the nation in the percentage of residents who have health care coverage. SEE NOTE 13

E. Most patients in Vermont aren't directly responsible for the actual costs of their health care.

F. The financial access to health care varies enormously. For some people, there are minimal financial barriers to obtaining necessary care. For others, necessary care is financially inaccessible.

G. With significant exceptions, Vermonters have enough health care facilities and personnel to serve their needs. The chief exceptions are related to shortages of primary care practioners in some rural parts of the state, dentists in some areas, physicians in pediatric subspecialties, nurses and nursing assistants.

H. Generally speaking, Vermont's utilization rate for medical care is below the national average and the national utilization rate is the lowest in the industrial world.

I. Vermont adopted community rating in the early 1990s to assure that all small businesses and individual Vermonters have access to health insurance at rates generally available in the marketplace without discrimination based on health status or, within certain parameters, age.

J. Government regulation limits market forces in both health care and health care coverage for certain policy purposes. Limitations are imposed, for example, to make private coverage available for people with medical problems and to spread the cost over the insured population.

K. Employer-paid health insurance has its origins in efforts by businesses to attract employees during the World War II-era of wage and price controls. It is tax deductible to the employer. Individually purchased health insurance is only partly tax deductible (and only recently) to the individual. Employer-paid (and employer-selected) health insurance is the dominant form of coverage.

L. The Vermont health insurance market for individuals (those buying insurance for themselves rather than receiving it through their employer) is very small, and is characterized by a significant adverse selection factor (sicker people buying policies while healthier people go uninsured). This could result in a destructive progression in which (1) premiums rise in cost and thus become less affordable, (2) only the sickest, who need insurance most, are willing to buy in, and (3) premiums therefore become even more expensive and eventually unaffordable to all but the richest and most desperately sick Vermonters.

M. Insurance, which is intended to protect an insured from excessive cost, is not the same as a pre-paid health plan. They are different, especially in regard to their affordability. The fact that many people fail to distinguish between the two concepts complicates the discussion of health care affordability.

N. Drug coverage above $2,500 per year is not available in the individual insurance market and available only with high-cost policies in the small-group and association markets.

O. Under ERISA, the Employee Retirement Income Security Act of 1974, the health insurance of a significant number of Vermonters is beyond the reach of most State regulations, including reporting requirements. This limits financing options for policy makers and limits other policy making choices.

P. The practice of third-party payment tends to shield both consumers and providers from understanding the cost consequences of their behavior and of the health and medical choices they make.

Q. Although health care providers are increasing their use of expensive, high-tech equipment, cost-benefit information about new technology is generally not measured or is not available to consumers and policy makers.

R. Because most people using health care services do not pay the cost directly, and because cost information is not available in any event, perceived competition or the threat of competition in the health care provider industry often leads to perverse incentives, with providers responding by adding new and expensive services rather than by controlling costs and striving for efficiency.

S. Providers often don't have access to necessary medical history and other information about the patients they are treating.

T. Providers often don't have access to information about the cost of the diagnostic tests, drugs and treatments they order and prescribe; patients also tend not to have this information.

U. The small size of the potential health insurance market in Vermont has a negative impact on attracting out-of-state insurance companies that might offer competition to existing carriers. SEE NOTE 22

V. In general, Vermont is too small and too rural to sustain a competitive market among larger health care institutions. With the exception of a few health care sectors in more urban locations, effective competition does not exist. SEE NOTE 23

W. The state's free clinics and federally qualified health centers play an important role in providing affordable care. Some of these, however, are financially vulnerable and their services limited in scope.


IV. Problem Statement

A. The cost of health care is causing serious problems in the lives of many Vermonters. SEE NOTE 24 Testimony we have received indicates that a significant number find that

B. Some Vermonters, including many with disabilities, find health care physically inaccessible.

C. Some independent health care providers are experiencing or in danger of experiencing financial difficulties that would jeopardize their ability to care properly for their patients and also jeopardize the economic survival of their institution or practice.

D. Financial incentives offered to health care providers by insurers, vendors and others have an unmeasured negative effect on quality and availability that is likely to be significant. SEE NOTE 26

E. Some health care providers are experiencing difficulties in hiring qualified health care professionals and paraprofessionals, jeopardizing their ability to care properly for their patients and, in the case of independent providers, potentially jeopardizing the economic survival of their institution or practice.

F. While the current Certificate of Need (CON) and hospital budget process focuses attention on the costs in the hospital sector and may have some effect in holding down costs, the lack of regulatory resources and meaningful sanctions have limited the effectiveness of this process. SEE NOTE 27

G. The current health care coding, authorization and payment process is complex, opaque, outmoded, and prone to error, creating costly and inappropriate administrative burdens and patient accessibility barriers.

H. A significant number of Vermont consumers and providers are unable to evaluate the likely costs and benefits of important care and coverage decisions they must make. These include:

I. Adverse selection is driving up costs in the market for individual insurance. And the more premium prices go up, the fewer healthy people are likely to buy into what could become a progressively shrinking market, with the result that, as a practical matter, individual coverage could cease to be available because it would be unaffordable. There is no mechanism in Vermont for spreading the risk in this market over a broader population base.

J. Many employed Vermonters find that the only health care coverage available to them is that chosen by their employer without regard to their particular needs or those of their families. As a consequence, some are insufficiently or inappropriately insured.

K. Many Vermont employers are unable to find appropriate coverage for their workers at an affordable price. As a consequence,

L. The sheer size of the health care economic sector, together with its unchecked, rapid growth


V. K-12 Education in Healthy Behaviors, Media Literacy

A. A significant number of today's problems in health care affordability can be attributed directly or indirectly to unhealthy habits, many of which were acquired during childhood in direct response to effective advertising specifically intended to encourage self-destructive choices. We begin, then, at the most important and fundamental level, with the need to improve the education of young Vermonters about health and illness, about nutrition and exercise, about risky habits and behaviors, and about how to recognize the intent and effect of risk-related media messages.

B. Both for reasons of cost containment and for the related and more fundamental goal of improving public health, we recommend that the State embark on an immediate, aggressive and unprecedented effort to improve health education at the K-12 levels. This effort should be supported by state and federal financial support and incentives. These efforts should foster a wide variety of educational initiatives -- not to tell students how to behave, but to assist them in understanding and choosing to adopt healthy behaviors.

C. We recommend that age-appropriate health topics -- including nutrition, physical activity, sexual behavior, disease process, infection control, and tobacco, alcohol and drug use -- be thoroughly integrated into and across curricula and be incorporated into school portfolio and testing programs. Where these programs are already in place, they should be supported; where they are not, they must be developed.


VI. Utilization

A. We strongly believe that any effort to curb utilization should be within the context of an expressed goal by the State of encouraging all Vermonters to see their doctors on a regular basis.

B. We have received sufficient testimony, however, to conclude tentatively that increased utilization of some procedures and treatments is driving up health care expenditures and insurance claims and premiums. We also understand that doctors often choose among available procedures and treatments without understanding what they cost. Data on these issues are incomplete, and judgments based on historical data are of limited value. Because patterns of utilization are constantly changing, both data and judgments based on them quickly become out of date.

C. We offer two significant initiatives intended to curb unnecessary utilization:


VII. The Common Care List; The Risk List

A. We recommend the establishment of a Common Care List, as outlined below.

B. We recommend the establishment of a Risk List, as outlined below.


VIII. The Incentive Plan for Medicaid

A. The primary responsibility for maintaining wellness and for paying for health care rests with the informed individual and family, not with the government. People differ, however, in their ability to pay for health care. One legitimate role of government is to ameliorate differences in ability to pay for health care, while continuing to recognize the primary role of the individual and the family.

B. Competition in health care and coverage, wherever and to whatever extent it exists, tends to control costs, foster efficiency and maintain affordability. SEE NOTE 30 Therefore, while government has a responsibility to assure that all citizens have financial access to health care, in meeting this responsibility it should seek to choose methods and mechanisms that maximize competition. The opportunity to save or waste money in marketplace transactions is a powerful incentive for consumers to educate themselves about cost effectiveness and risk avoidance. Government should design its programs to maximize these incentives.

C. We recommend the State conduct a 5-year pilot project as follows: SEE NOTE 31

D. We recommend that the State apply for any federal waiver necessary for this experiment, and, mindful of the value this could have for Medicaid and other insurance plans across the country, we recommend that the State aggressively seek grant funding to pursue it. SEE NOTE 33

E. We also note that this proposal and any future voucher program could include a Smart Card feature that would enable participants to carry a card on which credits, debits and balances could be encoded, along with personal health data such as blood type, allergies, immunizations, prescriptions and similar important information. Access to such encoded data could be limited by encryption, allowing different levels of need-to-know access by physicians, pharmacists, emergency medical technicians, etc.


IX. Administrative Cost Control

A. Context and Magnitude

By conservative estimate, Vermonters spend $400 million a year on health care administration, and that amount is expected to grow by at least 8 percent per year. SEE NOTE 34

B. Legislative Oversight

C. Study To Identify Administrative Costs

We recommend that the State conduct a grant-funded, year-long, well-staffed study of existing literature and Vermont data on where administrative costs occur in health care, their justification, whether the burden is worth the yield, and how unnecessary administrative costs can be decreased. This study also should identify sectors in Vermont where data are insufficient.

D. Study of Range of Hospital Services


X. Information Technology

A. We recommend that the State, following the models of multi-state cooperation for pharmaceutical purchasing and for the Electronic Benefits Transfer (EBT) card, seek the cooperation of neighboring states in enabling and enhancing the use of new and existing technology to increase the speed and coordination of information exchanges about health care and coverage.

B. This effort should be designed to decrease both the use of paper and the staff time currently required to fill out paper forms, to produce paper correspondence and to make telephone calls related to claims and benefits.

C. It also should have the goal of enhancing the knowledge that care givers have immediately available at the time they are treating patients. This would include access to patient record databases and to clinical decision support applications such as Problem-Knowledge Couplers. SEE NOTE 40

D. This effort must comply with the Health Insurance Portability Accountability Act (HIPAA) requirements regarding electronic data interchange and should complement other current initiatives and practices that are consistent with these goals.

E. This effort should be aggressive, with the participating states setting out deadlines, incentives, benchmarks and compliance consequences. The investment required to achieve these goals would be significant, and relevant federal waivers and demonstration grants should be aggressively pursued. Unified requests for proposals should be considered, and private sector solutions sought out.

F. Insurance regulations and policy conditions should be immediately reviewed and revised to enable electronic communications and remove any disincentives. Doctors, for example, should be paid for time spent consulting with patients by e-mail, video conferencing and other electronic methods.

G. As part of this effort, a private-sector central electronic clearinghouse should be established that would accept claim, referral, and other transaction data from computer systems around the state, reformat the claims to meet the requirements of the many different insurance carriers, and store the de-identified data (as required by HIPAA guidelines) in a statistical database. Stored data would include claim data for physicians' services, prescriptions, durable medical goods, and lab work. SEE NOTE 41

H. To the extent that some of these efforts are currently under way and some of these services are already available, they should be supported, provided they are compatible with a system that can be planned and executed in a unified manner. Where such efforts do not exist, they should be initiated. The goal should be a ubiquitous and compatible information technology capability throughout Vermont's health care economy.

I. In pursuing the goal of greater computerization, medical records privacy should be strengthened, not weakened. Every person using the health care system should be confident that his or her privacy will be respected, and that all medical records will be used only as necessary and otherwise will remain confidential. Federal rules relating to medical records privacy will take full effect in April 2004, but these rules leave significant gaps in protection, notably in the area of marketing. SEE NOTE 42

J. We recommend that the Legislature pass a medical records privacy law providing protection broader than that of the federal rules, while being careful not to impose an entirely separate regulatory system on the provider community.


XI. Medicaid Reimbursement

A. We recognize that inadequate Medicaid reimbursement rates are causing both availability and affordability problems in Vermont, as care givers curtail the number of Medicaid patients they will see and as unreimbursed costs are shifted to commercially insured patients, raising the cost of claims and premiums.

B. Following current legislation, we recommend that the State increase Medicaid reimbursement rates incrementally until they reach Medicare levels. SEE NOTE 43

C. Because this increase would be intended to cure cost shifting problems, each incremental increase should be predicated on a showing that costs are being "unshifted," and that the harm caused by cost shifting is actually being alleviated by the expenditure of the additional funds.

D. In addition, reimbursement levels should be contingent each year upon compliance SEE NOTE 44 during the previous year

E. We recommend that reimbursement increases be entirely dependent upon outcome measurements with no discrimination by type of provider; any provider who achieves the outcomes should get the increase.


XII. Pharmacy Cost-Control Measures

Acknowledging that much work has been and is being done in this area, we recommend that the State:

A. Continue its aggressive participation in multi-state efforts to establish lower drug prices through collective purchasing power. SEE NOTE 45

B. Seek changes in regulations and practices that would allow uniform monthly prescription refill anniversaries for individuals and families who have multiple prescriptions.

C. Seek changes in regulations and practices that would allow people to buy larger supplies of drugs and refill prescriptions less often. In no case should the refill limit be lower for a Vermont retail pharmacy than it is for a mail-order pharmacy.

D. Provide free samples of generic drugs to physician practices for distribution to uninsured patients. (Drug representatives currently provide free samples in a largely successful effort to condition patients to request more expensive brands of equivalent drugs, an effort reinforced by media advertising.) SEE NOTE 46

E. Seek to have public and private insurers increase the co-payments for non-generic drugs in an amount equal to the difference in price. (Since not all generics are exactly equal to brand-name versions, some ability by prescribers to differentiate may be appropriate.)


XIII. Financial Access to Health Care

A. We offer here several options regarding health insurance and other methods of assuring Vermonters' financial access to health care. We agree that our goal should be to have all Vermonters insured, but we disagree about how that goal should be pursued. These recommendations, then, are not unanimous and some of them are strongly opposed by individual commission members. They are offered here as options worthy of consideration. (The exception is the recommendation in support of safety-net providers, which is supported by all commissioners.)

Letter to the Vermont Congressional Delegation

324 Gonyeau Road
Plainfield, VT 05667

December 4, 2001

Senator Patrick Leahy
Senator James Jeffords
Representative Bernard Sanders
United States Congress
Washington, D.C.

Dear Fellow Vermonters:

I enclose for your consideration a copy of the final report of the Governor's Bipartisan Commission on Health Care Availability and Affordability, which I have had the honor of chairing for most of the past year.

As we note in the report, there are important aspects of the problems we see in health care in Vermont that cannot be adequately addressed except at the federal level.

I have collected from my colleagues on the commission a number of recommendations for reform at the federal level. I present these recommendations here with the disclaimer that, while these ideas were put forward by individual commission members, the commission did not review them, deciding instead to focus on recommendations for action at the state level.

Therefore, please consider this letter from me as a compilation of the ideas submitted by different commissioners. It is my strong belief that these recommendations, which call for increased flexibility for states and a streamlining of requirements for states and for providers, would make government and providers alike more responsive to consumers. I also believe that the cumulative effect of these changes would moderate prices and increase access to health care in Vermont.

I hope these recommendations will be of value to you in your own efforts to ensure health care availability and affordability for all Vermonters.

The Employee Retirement Income Security Act of 1974

  1. Amend ERISA to allow states to include all employers, whether fully insured or self-insured, in any pool used to spread the risk of individuals who are more difficult to insure.

    ERISA preempts many state laws and makes it more difficult, if not impossible, for states such as Vermont to extend insurance to the uninsured, to control costs, and to regulate their health insurance markets to spread risk. Essentially, this law does not allow states to regulate health benefits that are provided directly by the employer, rather than by an insurer. This preemption allows small employer groups to self-insure when they are good risks (often retaining only a small part of the risk) and then return to the insured marketplace when their experience deteriorates. Thus, employers can avoid state laws, such as community rating or rating bands, that are designed to spread the risk, and, by cherrypicking the good risks, increase the costs of insurance to those employers remaining in the insured market.

    This law also prevents states from placing a surcharge on premiums paid by self-insured employers to fund coverage for individuals buying their own insurance, whether through a high risk pool, a reinsurance mechanism or other means.

    In addition, Vermonters insured through such plans lack access to state law protections, such as independent external review, and to the state complaint resolution process. State officials are powerless to assist consumers who come to them with serious and sometimes critical problems that could readily be resolved under state law. Although the proposed Patients Bill of Rights would improve this situation by providing some rights to these employees, the federal government finds it difficult to handle individual complaints. It is important that federal legislation allow state laws such as those governing external review procedures to remain in place. Legislation should also make it clear that ERISA does not preempt the right of state governments to require insurers to provide consumers access to state external appeals panels and to the important remedies they provide, including restitution.

Pharmacy Costs

  1. Provide Medicare coverage of prescription drugs.

  2. Extend the 340b Pharmacy Benefit Program, currently available to FQHCs (Federally Qualified Health Centers), to Critical Access Hospitals (limited service hospitals that receive cost-based reimbursement) such as Grace Cottage and Gifford. (I understand that Mt. Ascutney will join the list shortly.)

  3. Re-regulate the direct-to-consumer advertising of prescription drugs, restoring it to pre-1995 regulatory status. We have received substantial evidence that this advertising has resulted in improper prescribing practices and unnecessary utilization.

  4. Re-examine the patent laws to determine how much protection for a drug developer is "enough." Patent laws properly afford economic protection to those who invest time, talents, and resources in developing products (including prescription drugs) that make our lives better. The existing patent laws, however, lend themselves to game playing, by which pharmaceutical manufacturers can extend patents as they are about to expire, thus keeping generic products off the market and keeping costs high.

  5. Re-write the drug re-importation law of 2000 so that it will be able to accomplish its original objective of facilitating the safe re-importation of U.S.-made drugs at reasonable prices. As written, the law has serious problems that will prevent it from ever becoming effective.

  6. Request an audit review of the practice of determining expiration dates on drugs, with the goal of identifying any for which the authorized shelf life might be extended without harm. This would allow Vermonters to avoid throwing out usable medicine.

    Medicaid Reforms

  7. Eliminate the requirement that when individuals receiving Medicaid waiver services are admitted to a hospital for short stay, they must be dis-enrolled and then re-enrolled in the waiver program, even if the hospitalization is for only a couple of days.

  8. Allow states such as Vermont to access their full SCHIP (State Children's Health Insurance Program) allotment. Vermont should not be penalized for having done well by its children.

  9. Secure protection for 1115 Waiver states, such as Vermont, and preserve Medicaid expansions by granting permanency to expansion populations by moving them into a state's base for budget neutrality purposes. This would not result in an expansion of current coverage, but would allow Vermont to maximize federal funding for the coverage we already have in place.

  10. Repeal the OBRA93 (Omnibus Budget Reconciliation Act of 1993) ban and allow states to experiment again with long-term care (LTC) projects that encourage and reward the procurement of LTC insurance and result in Medicaid savings.

  11. Eliminate the institutional bias in Medicaid and create a level playing field for institutional (i.e. nursing homes) and home and community based (RCB) services by permitting states to include RCB services as a regular Medicaid plan coverage.

  12. Permit states to address the needs of "dual eligibles" (i.e. persons who are eligible for Medicare and Medicaid benefits) in a holistic fashion.

  13. Promote dental-care access by providing an enhanced, 90 percent federal Medicaid match for these services.

  14. Eliminate the exclusion of incarcerated individuals from Medicaid coverage. This restriction is discriminatory and does not facilitate people getting necessary services, nor does it facilitate their successful re-entry into their communities upon release.

  15. Support patients' return to home- or community-based settings by permitting providers to bill Medicaid for discharge planning and service coordination for a hospitalized individual, including care supports paid for caregivers (i.e. a developmental home provider, foster parents, etc.) so the person's housing situation is not jeopardized. This would avoid uncoordinated treatment between inpatient and outpatient services, poor services upon discharge, and the loss of hard-to-find housing situations.

  16. Eliminate the IMD (Institutions for Mental Disease) services exclusion under Medicaid for persons age 22 to 64. This exclusion is discriminatory in that it singles out the only group of people that is categorically not allowed to receive Medicaid reimbursed services (other than people incarcerated, as noted above). The exclusion results in a disincentive for people to receive needed inpatient care, in that such care is funded with state money alone. This situation precludes 1915c Waiver approval, which would provide comprehensive home and community-based care, because there is no Medicaid savings to propose for budget neutrality. (There is no savings to Medicaid, since Medicaid does not pay).

  17. Eliminate the requirement that Medicare must be billed first for people who are insured by both Medicare and Medicaid, even when the service provided is not covered by Medicare. This practice results in extremely long delays in payments to the provider and significant duplication of paperwork.

    Medicare Reforms

  18. Amend the Medicare reimbursement formula, which unfairly discriminates against Vermont. In 1996, the American Hospital Association calculated a ratio of actual reimbursement to allowed costs for each state. In Vermont, Medicare reimbursement was about 84 percent of the actual cost of providing care, the second lowest in the country. (New Hampshire hospitals were reimbursed at 94 percent of costs, New York and Massachusetts hospitals at 106 percent). Hospitals in states with higher Medicare reimbursement rates can give greater discounts to health plans doing business in those states, with resulting lower costs to employers in those states. Vermont's Medicare reimbursement rate should be raised to the same percentage of cost that is provided by reimbursement formulas in neighboring states.

  19. Provide Medicare coverage of basic services needed by people with mental health problems or developmental disabilities. These services include targeted case management, chemotherapy provided by a registered nurse, day treatment, emergency care services, specialized rehabilitation services, residential support, respite, crisis intervention, supported employment, and community support and skills building.

  20. Instruct the Centers for Medicare and Medicaid (CMS) to record and report home-care denial rates accurately. With respect to cases that are appealed, denial rates reported should not include initial denials, but only those counted after appeal; they should not include errors made by the fiscal intermediaries, which currently are frequently counted as home care agency denials.

  21. Direct CMS to change its home-care agency review policy to one based on risk as defined by government auditing standards. Agencies with a history of compliance (denial rates consistently below 5 percent, for example) and high quality care in recent comprehensive reviews should be identified. To save time and money, routine Medicare audits of these agencies should include reviews of only a small sample of the claims submitted rather than burden the agency and Medicare with extensive reviews. Only if the sample shows problems should Medicare conduct a more extensive audit.

  22. Instruct CMS to shorten the OASIS (Outcome and Assessment Information Set) form for home care to include only those questions necessary for reimbursement under the Prospective Payment System (PPS). Eliminate the requirement that OASIS forms be used for non-Medicare patients.

  23. Revise the Medicare "homebound" eligibility requirement so that it is based on medical status only, and not on other factors that require interrogation and documentation and lead to wide disparity in eligibility determinations.

  24. Eliminate the "chronic but stable" basis for disqualification for Medicare home-care services. Establish Medicare home-care eligibility for disabled persons who are bed bound but who can, with the assistance of others, frequently leave their homes.

I submit these recommendations for your consideration and I thank you for the work you continue to do to promote health care availability and affordability in Vermont.


Cornelius D. Hogan


Letter From Rep. Koch

State House
Montpelier. Vermont

November 27, 2001

Cornelius Hogan, Chair
Governor's Bipartisan Commission
On Health Care Availability & Affordability

Dear Con:

I join this report with some serious reservations. In doing so, I recognize the very diverse views held by the seven members of the Commission and the consequent difficulty of securing the agreement of a majority. I thank you for your leadership of this Commission; it has been a privilege to work with you and the other members on issues of such great importance to the citizens of Vermont.

I do join in this report, because it contains a number of recommendations which are worthy of legislative consideration. Where I have major disagreements with portions of the report, they are indicated in the footnotes. Nevertheless, I think it necessary to state separately my greatest reservation concerning our report.

My major concern is not what is in this report, but what has been omitted from it. In April of this year, the legislative Joint Fiscal Office projected a $75 million deficit in the Medicaid/VHAP program by FY2008, even assuming adoption of a 67 cent per pack cigarette tax increase. In November, the Joint Fiscal Office raised that number to $306 million!

The fact is that Vermont, in an effort to provide universal health insurance, has expanded its Medicaid/VHAP system to the point where it is far beyond what is sustainable. This Commission should be sounding that alarm loud and clear, but there is only a hint of warning in this report.

The report does contain several suggestions that may help. Anything that can relieve unnecessary administrative burdens will help. Facilitating greater education and information sharing among consumers and providers will help. The Medicaid Incentive Plan in Section X, which has yet to be fully articulated, may help. But there is little time. FY2008 will begin in less that six years, but the deficits in the Medicaid/VHAP program are projected to begin with a $32 million deficit in FY2003, which is the budget the legislature will be working on in less that two months.

Vermont's present Medicaid/VHAP system is broken beyond repair. It needs to be thoroughly restructured, and in my view, designing a restructured system was the major task of this Commission. It is a task that the Commission did not complete, and I find that to be a major disappointment.


Thomas F. Koch


Letter From Rep. Mazur

State House
Montpelier. Vermont

November 25, 2001

Con Hogan, Chair
Governor's Bi-Partisan Commission on Health Care
Availability and Affordability

Dear Con:

Ref: Minority Report

I want to express my appreciation for the opportunity to work with you and the other members of the Commission during the past year. I have been impressed with the knowledge, skills and dedication each member has brought to our critically important work.

I agree with several important sections of the Report. The recommendations designed to reduce wasteful administrative costs, improve consumer education, and establish best treatment protocols are all worth considering. Unfortunately, I am concerned that perhaps in our desire to reach consensus, we have failed to acknowledge some of the underlying reasons for the problems facing Vermont's health care system, and that we have therefore been unable to present real solutions to our problems.

There are two major problems facing Vermont's health care system today:

  1. The insurance market is increasingly unaffordable for Vermont businesses and individuals. This is now the third year in a row where policyholders have faced double-digit premium increases.
  2. Vermont cannot afford its Medicaid program. The Medicaid financial deficit will be $34.8 million in FY '03 and will grow to $306 million in FY '08 unless substantial changes are made.

Our health care affordability crisis is the direct result of public policies that have: (1) imposed regulatory burdens on the health insurance market without adequate consideration for their effect on the affordability of premiums; and (2) expanded the Medicaid program to over 20% of Vermonters without the application of appropriate cost containment strategies.

We need aggressive and effective responses to correct these mistakes.

Strengthening the health insurance market:

Reforms designed to strengthen the private health insurance market should include:

Reforming Medicaid:

Substantial reforms must be made to place the Medicaid program on a financially sustainable footing. The goals and principles for Medicaid reform should include the following:

Again, thank you for the opportunity to work with you and the other members of the Commission in pursuing our goal of affordable, quality health care for all Vermonters.


Rep. Frank Mazur

cc: Commission members