OpEd: Rethink health care and health insurance

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Vermonters have recently witnessed, once again, the annual battle over health insurance rate increases for individual and small business plans. It's worth taking a long look at just what the state thinks it's doing, and how it does it.

Families and small businesses purchase health insurance plans to protect themselves from the risk of expensive medical treatments. The State has a long list of requirements that the two surviving carriers serving this market - Blue Cross Blue Shield of Vermont and MVP - must comply with to do business here. They include some thirty specific mandated benefits, prohibition of unfair business practices, minimum actuarial value ratios, community rating, guaranteed issue, and maintenance of reserves. The Affordable Care Act (Obamacare) added additional requirements.

Since 1984 the State has set annual limits on the rates that insurers can charge their customers. The law tells the insurers what care they must pay for, but the insurers can't control what the providers charge. The regulators have to cap the insurer's revenue growth to "contain costs." At the same time they have to make sure the insurers receive enough income to maintain adequate reserves.

In July the two insurers filed with the Green Mountain Care Board their annual request for premium rate increases. BCBSVT asked an average rate increase of 14.3 percent, and MVP of 10.9 percent. On August 7 The Board approved 12.4 percent and 10.1 percent respectively.

According to a VTDigger report, "the board acknowledged that the increases they approved for next year are not affordable for consumers, but in making their decisions they had to take the financial health of insurers into account." At a public hearing "dozens of Vermonters spoke out against the hikes and said they would stifle their access to health care."

Activists can always fill a room with people who want health care services at a large discount, or free, and demand that government (GMCB) either impose price controls on health insurance or take over the whole health care industry. You rarely if ever hear an intelligent analysis of why health insurance and care cost what they do.

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A month after the board's rate increase action chairman Kevin Mullin urged Gov. Phil Scott to increase Medicaid expenditures by $70 million. Medicaid now enrolls 33% of the state's population and pays far below the actual cost of services rendered by hospitals, clinics and doctors. The Medicaid (and Medicare) underpayments are covered by overpayments by the customers of the insurance companies through ever higher premiums.

A startling admission in the Mullin letter to Scott is that increased Medicaid spending is needed to help hospitals shift to the "All Payer" payment model that the Shumlin administration invented to replace the failed single payer effort. One has to be amused to learn that we have to increase Medicaid reimbursements to make All Payer, sold as a wonderful vehicle for achieving cost savings, actually achieve cost savings!

Vermont's problem is that it has for thirty years expanded Medicaid coverage, seriously and chronically underpaid for Medicaid services, thus shifting much of the costs to private insurance premiums. Then it attempted Shumlin single payer to eliminate those "skyrocketing" premiums, and then replaced the abandoned single payer plan with All Payer to achieve cost savings, which now are said to depend on increasing Medicaid reimbursements. (Gov. Scott rejected Mullin's request.)

Suppose you, reader, were one of the five GMCB members charged with decreeing the "right" premium and Medicaid payment increases to salvage One Care, the "accountable care organization" that is the centerpiece of All Payer. How would you go about making these crucial decisions, in light of conflicting and delusionary statutory goals, the need of the insurers to maintain adequate reserves, providers reluctant to become more efficient, individuals reluctant to avoid poor health practices, consumers clamoring for lower prices to them, taxpayers grumbling about the costs, and legislators alarmed that Medicaid is crowding out other state spending.

Does it occur to anybody that what passes for "reform" is critically based on politically determined percentages? Or that no regulatory body can determine what medical care is justified and what is not? Longtime health care analyst Hamilton Davis, an advocate for single payer, has stated candidly that "Neither the Green Mountain Care Board nor the Scott administration, nor the Legislature, nor the insurance industry, nor any other element of the regulatory system has any ability whatsoever to distinguish medically justified care from that which isn't." Ouch!

It should have become clear that this regulatory, economic and political excuse for "reform" is increasingly costly and unworkable. Vermont is long overdue for a thorough rethinking of how to help Vermonters maintain their wellness and access adequate care. That task is not the same as protecting every interest in the health care universe.

John McClaughry is vice president of the Ethan Allen Institute.


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