Vermont's costly care is no model
Toolbox
By JOHN FRANCO - Published: July 1, 2009
So Gov. James Douglas met with President Obama touting Vermont as a national model of health care cost containment. That's odd, because when measured by the bite it takes out of the economy, Vermont has the most expensive health care system in the world.
While Gov. Douglas was schmoozing the president, telling him that the state's approach has been successful at keeping down costs, his administration's own Feb. 5, 2009, health care expenditure analysis painted a very different picture.
"Since 1999," the reports noted, "Vermont's annual health care spending growth has consistently exceeded the national growth … Over the last 10 years, the average annual increase in health care expenditures was 8.9 percent in Vermont and 7.1 percent for the U.S." The share of Vermont's economy accounted for by health care reached "the highest level recorded since the tracking of this data" — 17.1 percent in 2007 compared to 16.2 percent nationally.
The international comparison is much worse. According to President Obama's Council of Economic Advisers, other high-income industrialized countries spend less than 10 percent of their economies on health care. Vermont's level of spending is more than double than that of most of them.
Consider the hidden tax burden. Growing health care costs at a time of shrinking payrolls due to the recession mean that in 2009 health insurance will take twice the bite from the payrolls of Vermont's insuring employers than Social Security takes in employer payroll taxes. Twice.
The contention in the single-payer camp that for-profit medicine and health insurance is the culprit does not explain what's going on in this state. Vermont is entirely served by nonprofit community hospitals. Its two principal private insurers are also nonprofit. Blue Cross and Blue Shield of Vermont is specially chartered by the Legislature as quasi-public body called a nonprofit hospital service corporation.
Part of the reason is that we are a small state in a large national economy. The number of formerly uninsured people now covered by neighboring Massachusetts' Commonwealth Care program (430,000) is greater than the total number of Vermonters covered by private insurance (371,000). We have a limited ability to negotiate costs for things like drugs, equipment, and supplies and could use federal help in that area. But that doesn't explain why we are doubling our health care spending every eight years, faster than the national rate.
The real reason has been the lack of any political will, especially by the Douglas administration, to enforce the cost-containment statutes on the books since 1993. One could not ask for a more far-reaching or comprehensive set of statutes. We have both a unified annual state health care budget, as well as annual formal budget approvals for hospitals. But as administered, these laws have been a toothless tiger.
The hospital budgets allowed by state regulators every Sept. 15 have consistently been at this double-every-10-years rate. No consideration has been given to employing the budgeting and cost-containment tools used in other countries — especially those with multi-payer systems like ours — including global or bundled payments to hospitals (as opposed to the current a la carte payment system), limiting or denying payments for less clinically or cost-effective treatments, and imputing efficiency and cost-reduction factors in budgets. The statute provides that each hospital "shall" operate within its established budget. There have been no consequences when one does not. At bottom those administering these laws have been complicit in a binge of health care spending reminiscent of the old sci fi thriller "The Blob That Ate Philadelphia."
The report card is clear. By the Douglas administration's own admission, Vermont has done a lousy job of cost-containment. We are a state that pioneered demand-side management techniques in electric and energy conservation. We have all the statutory authority we need to apply the same demand-side management to health care spending. And we don't need a blessing from President Obama do it.
John Franco of Burlington served in 2006 as special counsel to the Vermont Senate Health and Welfare Committee on Health Care Reform. This column is one in an occasional series on health care reform.
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