Fletcher Allen CEO concerned about sustainability of single-payer

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Fletcher Allen CEO concerned about sustainability of single-payer

Tue, 06/10/2014 - 8:13am -- tim

by Morgan True vtdigger.org The CEO of Vermont’s largest hospital and health care system is concerned about whether a publicly financed health care program can consistently bring in enough money to cover the needs of all Vermonters. But state officials say they’ll be able to design a program that avoids the budgetary battles that plague Medicaid, the state-run health care program for the poor, and other government programs that rely on appropriations of state money. Much of the dialogue around health care reform is focused on what health services Green Mountain Care will cover and what taxes will pay for them. However, it will be crucial that the program be able to operate in perpetuity.

Fletcher Allen CEO Dr John Brumsted. Vermont Business Magazine file photo

“It is, in my view, difficult to see a publicly financed system where there isn’t so much pressure on the flow of money into the system that it becomes increasingly more difficult to provide care,” said John Brumsted.

Brumsted is CEO of Fletcher Allen Health Care in Burlington and also runs Fletcher Allen Partners, the hospital network that includes Fletcher Allen, Central Vermont Medical Center and two hospitals in northern New York.

Having enough money flowing into the government program expected to finance health care for virtually all Vermonters is important for Fletcher Allen, which received 43 percent of the state’s hospital spending in 2012 to generate much of its more than $900 million in revenue, according to an analysis by the state and the hospital’s tax filings.

Designing a program that will need roughly $2 billion in revenue in its first year to replace the care currently paid for by commercial insurance is something that worries Brumsted, he said.

Once it’s set in motion, the program will then have to keep pace with the growth in health care costs, which continue to outpace inflation despite the downward pressure exerted by state regulators and providers.

“Just look what the conversations are around Medicaid,” Brumsted said. “This past year’s increase dug the cost shift deeper because it didn’t keep pace with inflation.”

Medicaid reimburses providers at roughly 50 percent of their costs. Providers look to make up that loss in negotiations with commercial insurers, who pass those costs on to consumers through higher premiums.

At the outset of the last biennium, Gov. Peter Shumlin pledged to raise the Medicaid reimbursement rate by 3 percent for three years, and did so in 2013. But this year he proposed only a 2 percent increase, which the Legislature revised down further to a 1.6 percent increase.

House budget writers initially wanted to cut the rate increase even further.

Brumsted said he worries that the same budgetary tug-of-war could undermine the provision of health care services in a publicly financed system.

“I am concerned … that every year we’ll be going back and we’ll be having a very difficult conversation,” about how to make sure there’s enough money being appropriated for the program, Brumsted said.

Robin Lunge, director of health care reform for the Shumlin administration, with Lawrence Miller, Chief of Health Care Reform. Vermont Business Magazine file photo

But Robin Lunge, Shumlin’s director of health care reform, said Green Mountain Care is being designed in a way that makes it less likely to become a political football.

Act 48, the 2011 law that put Vermont on a path to public universal health care, requires lawmakers to pass three-year program budgets.

“So, unlike Medicaid, which is yearly, Act 48 is proactive in looking forward and getting away from the dynamic that we currently have with Medicaid,” Lunge said.

The Green Mountain Care Board’s involvement in approving the benefit package and first three-year budget also set it apart from Medicaid, she said.

In addition, Green Mountain Care will eliminate the cost shift by eliminating much of the payer mix in the state – which is also why it’s often called single-payer. With all Vermonters covered by one program, there won’t be anywhere to shift the cost of underpaying providers, she said.

“(Funding cuts) won’t just impact a subset of Vermonters, so the incentives are going to be significantly different,” Lunge said.

Brumsted said regardless of the system that pays for health care, what is most important is that there be enough money to cover the cost of services.

“Any system, whether it’s one payer or 25 payers, where there’s enough money in the system to provide access to the highest quality care is a good system,” he said.

Michael Costa, the administration’s health finance expert, has said in the past that designing a strong governance structure for Green Mountain Care is equally important to defining what services will be covered and how to pay for them.

“You want to design a finance system that minimizes the potential of conflict between the administration, the Legislature and the Green Mountain Care Board,” Costa said in March. “I would anticipate that the financing plan delivered in January 2015 will talk a fair bit about the governance structure and how it’s going to work not just in year one, but in years three and five and 10.”

Ernie Pomerleau, a prominent real estate developer and member of the governor’s Business Advisory Council on Health Care Financing, is a supporter of the program, but said he recognizes it needs to be structured thoughtfully.

“We don’t want another Act 60 on our hands,” Pomerleau said, referring to the state’s education financing laws, which lawmakers have been trying to update for years.

TOP PHOTO: FAHC, right, with UVM Medical School, left, courtesy of FAHC.