Thank you for the opportunity to appear. Many in Vermont are watching at this point.
And the stakes associated with making the best possible set of decisions regarding change
to our health care system are great. This is because, the wrong, or inadequate decisions,
have the potential of making things even worse and the window to change again may not
be open for some years.
The purpose of these comments is to remind us of some of the fundamentals in play and to answer some of the questions posed by Jim Hester in his January memo.
Strip away the complexities and vagaries, the real and present issue is the rapidly rising cost and affordability of health care. All other issues, including access, are secondary.
Simply put, extraordinary rising cost is contributing to and even causing:
- An increasing lack of access in the form of a rapidly rising rate of uninsured, from 51,000 just 7years ago to 63,000 or so today, which at this rate will be shown to be much higher the next time an assessment of the uninsured is conducted, even with Catamount.
- An uncountable rise in the underinsured highlighted by a shift toward catastrophic and partial insurances.
- A movement toward less comprehensive care as business and individuals are being priced out of more desirable and preventative coverage.
- Increasing tensions between business and their employees, and related tensions between well-covered teachers, and lesser-covered citizens of our communities.
- Rising "taxes" in the broadest sense, as a result of the influence of:
- rising health care costs which show up in our school and property taxes as a result of rising health care costs at the town and school levels,
- income taxes as a result of increasing proportion of health care costs in the public sector,
- higher costs of goods on the shelf as a result business having to pass on its rising health care costs, and
- depressed wages as businesses pay more for health care and try to keep their overall costs of doing business in line
- and the list goes on.
This really is an issue of controlling the future costs of health care, or at least moderating them so that we can bend the curve away from the absolutely unacceptable forecasts if we do nothing. And, the earlier Legislative and Administration action is taken, the better. Actions, such as chronic care management, although worthy in their own right, are not going to result in noticeable cost control, for at least 5 to 10 years, if ever.
In 2001 when I chaired the Governor's Bi-partisan Commission on Health Care Availability and Affordability, Vermont was spending 2.1 billion on its health care. Today, a mere 7 years later, we are spending at least 4.2 billion, a doubling of the cost. Are we really ready to wait until we are spending 8.4 billion as early as 2015? Can you imagine the wreckage in its wake?
There are some ways that at some point we can use to control costs, but that are not available to us to make a noticeable difference in the near future
Those future ways include:
- The popular notion of paying for performance and quality. But we have to admit that we don't have the technology, experience, or agreement as to just how to do that. It is an agenda for the future. Even if related action is taken now, the results of implementing what amounts to a culture change won't have impact on cost in the foreseeable future.
- Major technology investments that have the promise to bring more efficiency to the fray. However, the experience so far with technology investments leave us far short of being able to show any system change in the cost rise. Further, we need to recognize that until we have a health care SYSTEM, that we will be funding the pieces parts of the system, often in a fragmented and piecemeal way. Finally, there is general recognition that the cost of such a system investment for the kind of technology improvements that would yield big results is of an investment size that is simply beyond us at this point. Again, significant investments of this type need to be made, but with the realization that noticeable cost impact will be many years away.
- A chronic care initiative, which will result in better health care and better quality of life for many Vermonters, on the surface, is a good thing to do. But we have to recognize that noticeable cost control related to this kind of initiative is also many years away. Even more vexing is that the only studies which show that disease management (which I call super managed care) that can control costs are very slim and limited to what may be considered 'captive' populations, such as shown in some Medicaid tests, or the V.A.. The odds that this approach will help control costs in reasonable time period, are long.
So what ways are within our means to begin to control the unacceptable rising cost of health care in the foreseeable future, recognizing that any changes made by this legislature and going to take several years to implement thoughtfully and well, and that with each passing year our health care costs continue to rise, at a rate of over 300 million a year now, and almost a half billion a year by 2011, years that are well within our planning horizon.
- The first and most important tool we have at our disposal is simplification of the currently overly complicated system. Universal access to the entire system, or a major part of the system, along with a fundamental common benefit plan along with broader public financing in place of premiums would be the single most combination of things we could do to simplify and control the costs of health care in Vermont.
- Second is the idea of formal targeting of what is a reasonable amount to spend for health care over time. In our book of three years ago, we made the case that an overall growth target could be about two times the CPI, instead of 3 to 4 times the CPI. Having a lawful target puts cost control in motion. Without long range targets we will continue to flop from year to year.
- Next is instituting Budgeting 101. There is no other enterprise in our lives, whether it is family life, our businesses, our complex corporations, or our schools and towns, that don't have a basic budget to respect and plan around. Health care has no true budgets. It is simply a runaway spending and expenditure machine. A budget is not "rationing" in the emotional sense of the word. It is the systematic and thoughtful allocation of resources. Come to think of it, why have a budget for the complex enterprise that is state government? Why don't we just let all of the agencies and departments spend what they want to spend? That, in effect, is what we're doing in health care.
- Finally, a system of visible, managed, and authorized taxes, instead of invisible, unmanaged, not understandable, corrosive and unauthorized premiums and taxes, will go a long way in setting mechanisms in motion to control the rising cost of health care.
In the book "At the Crossroads..." that Dr. Richter and I co-authored, we put forth a couple of large thoughts and even some numbers which painted a better fiscal future as a result of some serious bending of the cost curve. We further projected that by using reasonable targeting and budget techniques that the cost of care could be controlled to a level about 3% less than forecast, yielding a cost avoidance of a half a billion dollars a year after 5 years, for a total cost avoidance of almost one billion dollars a year over the period, given a fully publicly financed system. If achieved this would result in about a 20% reduction from current forecast. This is serious money and should serve as an incentive to bring the cost control side of this work into focus. At those levels, we have no problem in providing universal access. We also admit that the numbers may be optimistic, given the realities and time needed for implementation, but as an order of magnitude, they are a serious incentive for change.
I worry about short-term solutions that add more complexity to an already overly complex set of enterprises.
So before you act, I respectfully suggest that you review the key elements of H304, and find strong common ground on putting in place significant change that can begin to control these runaway costs and begin to listen seriously to the citizens of Vermont, who are the real experts. Because if we do not, we will have provided another year or two of incremental change that cannot change the rising cost curve. But if we do make some big changes to controlling the cost to all or part of the health care system, all else will follow, and we will have put in place a set of opportunities for longer term cost control, which is the key to providing access and high quality care to all Vermonters.
So, in sum, if we do this right, we could have a bill that will result in a health care system that will:
- Set real multi year spending targets and limits (not just forecasts)
- Authorizes real and controllable budgets
- Greatly simplifies financial transactions through universal access and common benefits
- After simplification, puts in motion technology investments that will result in greater efficiency because it will be dealing with a system, not just its parts.
- Authorizes spending through visible and managed taxation in the place of inequitable premiums and invisible taxes.
Finally, we need to make some guarantees to Vermonters, many of whom are very nervous about big change. First, an assurance must be made that any bill will demonstrate that the tax increase needed to fairly finance health care in Vermont, in aggregate, will be less or not exceed the revenue from the existing premium structure, for Vermont citizens as a whole, and business in particular. Further, there needs to be assurance that the bureaucracy needed to administer the financing and regulation of the envisioned system will not exceed the existing bureaucracy. Finally, and most importantly, is a demonstration that the future costs of health care in Vermont will be less than current projections. All of these are serious cost control considerations.
If we cannot make those guarantees, we should not move forward. Because anything less could leave us in worse shape as we move forward, with even bigger problems to unravel in the future.
So far, health care initiatives instituted over the last few years do not meet the terms of those needed guarantees.
Lessons from the Past
At this point I would like to make note of a few important findings of the Bipartisan Commission on Health Care Availability and Affordability, which published its report in 2001. Even though that was 7 years ago, it does provide some important perspectives to the current situation.
The commission was made up of people who have spent years listening to testimony and otherwise studying the problems of health care availability and affordability. We had differences, some of them passionate differences, in our political philosophies, and we differed on some of the directions reform should take. Although we took a substantial amount of testimony over nine months, our real task was to try to find common recommendations, despite our differences.
Even in 2001 we agreed that health care in Vermont was near a state of crisis. How little did we know, or could anticipate that many more Vermonters would go without health care coverage by now. We noted back then that health care costs in Vermont, were exceeding $2 billion a year, and was of sufficient magnitude, and was increasing at a sufficient rate to place state government itself in jeopardy, including every program for which it appropriates money
In 2001 we also noted that Vermont was 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. If we had taken bold steps then, the current budget for Vermont would be looking very different than it is today.
Most significantly we indicated then that we did not have a health care system in Vermont. That means:
- No one was in control.
- No one was responsible for ensuring that high-quality medical care is adequate for the needs of the public.
- No one ensured that medical charges are appropriate or that they are paid in full.
- There was no budgeting or targeted growth planning for health care in Vermont.
- There was little in the way of public accountability for the performance of health care institutions, or for their long-term planning. (This has changed somewhat for the better over the period in the form of H58 and other quality control initiatives).
- And we noted that administrative costs, including those associated with government paperwork burdens, had reached an unacceptable level, and no one has been able to do anything about it.
We all have to admit that with a few modest exceptions that in almost all of the areas noted that we are much worse off today than we were then.
At that time we did 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 (at the time) , for 5 percent less than what we were collectively paying then. Some of the opposition was on philosophical grounds, but in practical terms, we rejected that option for a variety of reasons, including:
- Concern over the negative financial impact on small employers and wage effects on employees in terms of reduced wages or lost jobs (assuming at the time that most program costs would come from a payroll tax which was a Lewin assumption).
- Concern over whether, in the American historical political context, it would be possible for government to control costs and utilization.
- Doubt that program funding would be maintained at an adequate level so as not to place health care institutions at financial risk and cause providers to leave the state.
- Belief that the political consensus necessary for implementation did not exist.
These are still valid concerns, but the problems have become so large that these concerns need to be re-examined.
We also recommended in 2001 that the Legislature take greater responsibility for ensuring the availability and affordability of health care in Vermont.
However, regardless of political stripe or philosophy the commission was 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 on the table, be given careful consideration.
But, in this regard, the words of Deane Davis come to mind when he was bemoaning the lack of action on a particular bill that he was interested in, when he uttered..."...this committee reminds me of a high stepping horse that I once owned, lots of up and down action, but little forward progress".
Significant change cannot be avoided any longer. We all now have the responsibility to bring about change big enough to make a difference, and modest enough to manage. That is the idea behind H. 304.
Some Thoughts on Administrative Cost Control
Following is some context and magnitude of the problem as defined in the 2001 Commission report. The following comments appeared in the report and are abstracted for this testimony, and are applicable to the proposition of H 304.
"By conservative estimate, Vermonters spend $400 million a year on health care administration and that amount has estimated to grow by at least 8 percent per year.
An uncalculated but clearly significant portion of this $400 million is spent on complying with paperwork requirements, any one of which may be justifiable in isolation, but which cumulatively comprise an unacceptable diversion of time and talent that could better be spent on direct care. Some of these requirements are mandated by State and federal regulations, but many are not. They must be re- examined, streamlined and scaled back.
An uncalculated but clearly significant portion of this $400 million appears to be wasted on the inefficient recording and exchange of information. Our health care providers, insurers and regulators who have not yet done so must immediately computerize, network and integrate their information systems.
An uncalculated but clearly significant portion of this $400 million appears to be wasted on dealing with a proliferation of incompatible and idiosyncratic forms, codes, pre-authorization criteria, etc., as well as with hundreds of decentralized claims- processing centers. These must be identified, standardized and consolidated.
We recommend that insurers develop a set of 20 standard "additional information" codes covering the 20 most common reasons for returning claims to providers. With each claim sent back, staff would be provided with a code indicating precisely the reason for return.
We recommend that health care providers send a simple, detailed, and complete invoice to the patient with the first billing, to inform the patient and thus curb unnecessary utilization and as a check against overcharges and double billing. An uncalculated but clearly significant portion of this $400 million appears to be spent on superfluous administrative functions and practices that are allowed to endure because of a lack of rigor within management and a lack of effective scrutiny by regulators or consumers. These functions and practices must be identified, challenged and modified.
We recommend that the Office of Vermont Health Access and private insurers reconsider the use of prior authorization procedures to determine if they are, in fact, cost effective.
Government is causing some of these problems, but limited scrutiny by government and by consumers has resulted in a lack of accountability by all parties. Simply put, there are enormous inefficiencies and unjustified paperwork burdens in the administration of health care, but, with notable exceptions, state government cannot see exactly where they are or how to remove them. To a significant degree, we cannot see because we are not looking.
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.
We recommend that the Legislature implement a study to review the range of services offered by hospitals serving Vermonters, to evaluate them with respect to quality, availability, affordability and other specified public policy goals, and to report findings within one year."
These recommendations were of a common sense nature. None of the recommendations regarding administrative costs are beyond the reach and capability of the Legislature to undertake. Yet, as you look at these, it is my view that over the last 7 years little has been accomplished.
A Business Perspective The following article will appear in the March edition of the Vermont Business Magazine. I thought they would be instructive for this committee.
"Why Business Should Seriously Assess H 304, the Hospital Security Bill
It's good to see the ever increasing activity of business in the health care debate. By and large, the focus has been on Health Savings Accounts (HSA's) and related techniques that are geared to control the cost of health care for employers and employees. These are increasingly popular approaches and current assessments put the usage of HSA's at about one third of businesses that contribute to health care costs of their employees, and it is growing.
However, has anyone noticed that the overall cost of health care is still rising at multiples of inflation, and that hospital costs have risen almost 70% since 2001? This is resulting in ever higher and higher deductibles and co-pays for employees, even for those who use HSA's. Even though the short term cost savings are welcome, the approach does little to solve the bigger problem, namely the continued virulent rise of the cost of health care, and particularly the cost of hospital care.
And these rising costs are now going well beyond the pressures on business and their employees. Rising costs are standing in the way of getting coverage to the substantial number of people who are uninsured in Vermont. And the ballyhooed Catamount program is not helping. The bottom line of Catamount is that because of continuing rising costs, and based on experience in other states with similar programs, as many people are foregoing health insurance as are being signed up for Catamount. In every state where government subsidized programs were created, there are more people uninsured now than when the program started. The net change in coverage has gone in the wrong direction, and so it will go in Vermont given a year or two.
The cost of incremental Catamount is unsustainable over time. It is only a matter of time before some politician utters publicly that "Catamount is dead." And the rising costs will continue in a big way. Even now, these costs are affecting our government's ability to fix our roads and bridges and our town and school budgets which are also being driven by rising health care costs. It is to the point where schools are now cutting teachers and programs, the very essence of effective education, all of which combine to drive up property taxes.
So where does all this leave us?
H. 304, the Hospital Security bill is not a solution to all of this, but it does put health care for hospital spending on a different path. First a little background information.
Hospitals represent about 40% of all health care spending in Vermont. It is the largest part of premiums, which have been rising steadily at 8 - 10% a year. Secondly, there is a level of overhead laden in hospital budgets that business would not accept if they were in charge, about 25%. A good chunk of that overhead is the cost of 'chasing the money'. Every dollar paid to hospitals must be extracted from individuals and families who in many cases just don't have the money. (Studies show that about half the bankruptcies in the country are a result of the cost of a medical event.) Or they have to extract it from insurance companies. Or, the hospitals are being underpaid badly by Medicaid and even Medicare. Also, about 80% of the cost of hospitals is what we can consider 'fixed' costs. This is the cost of keeping the hospital ready for patients who can come at any time in any shape. These costs are there, generally unrelated to utilization. Therefore, the use of HSA's may temporarily lessen the costs to individuals and companies using that technique, but do not affect the overall cost of hospitals, and by definition the overall cost of health care in Vermont. The end result is that the temporary relief, apparent through the use of HSA's, is just that, temporary. The cost of HSA's must also rise again as health care costs remain out of control.
So back to H. 304. What impact would this legislation, if enacted, have on business and their employees?
First, a word about the financing mechanism proposed by H. 304. The idea is that since hospitals need to be there when we each inevitably need one, that we all should help pay for them. It's kind of like the general public paying for our police protection. But enough of the ideology. Let's look at the practical effect on business and their employees.
But first, a quick side trip. In the world of ideology the use of the phrase 'single payer' has disproportionate influence over the debate. So that the reader can put the phrase into perspective, following are some examples of 'single payer' health care programs that we all know about. The most obvious is Medicare, where broad based taxes pay for the essential care of the elderly. It's one of the more cost/effective programs that touch 200,000 thousand or so Vermonters. Not one of them would want to see that program eliminated. Yes, it's not perfect (no health care program is) but it gets the job done. The Veterans Administration is another effective example of a single payer program. Even the Governor of Vermont benefits from a tax payer funded health care program, as do all state and federal employees. Trying to use the phrase 'single payer' to scotch discussion of alternatives, doesn't work any more. Too many people know better.
Starting with the fact that premiums for hospital care represents about 40% of overall health care cost, publicly financing hospital care would reduce premiums by 40% both for the business and the employee. This savings could offset some combination of a sliding fee scale for all Vermonters under age 65 (one example could be a fee in the approximate amount of $350 annually, combined with a payroll tax of about 4%.) This is but one example of a combination of revenue sources that could pay the bill that could raise enough to pay for every Vermonter who needs hospital care. And the phrase 'every' Vermonter is key. This approach would automatically give every Vermonter peace of mind, and at the same time take business off the hook of having to make decisions about the health care of the families that work for them. Further, this approach would greatly lessen the 'cost shift' of current practice of shifting the cost of serving the uninsured, to business, and individuals who have their own insurance. And, it would even help Catamount by making those premiums more affordable, thus resulting in more people signing up for the program.
Finally, an increasingly strong argument can be made that this approach could result in a stronger business economy in Vermont. Small businesses, which have been reluctant to add employees because of health care costs, would no longer feel that reticence. Wages that have been stifled because of the effect of health care costs on the bottom line could loosen up. At least on a regional basis Vermont businesses would have a noticeable economic edge over our regional competitors who will continue to pay the full freight of hospital costs, much like the competitive edge that Canada has developed over our stateside auto industry. Employees won't make their decisions about where to work primarily based on whether the company has a decent health care benefit. An even larger thought is that about two thirds of our economy is driven by consumer spending. Health care costs to our families are now to the point where, as 16% of our economy, they are now affecting traditional consumer spending patterns. All of these add up to a more dynamic economy.
There will be many persons and organizations critical of this thinking. But most of them will be people attached intimately with this broken system. But the ideas behind H. 304 deserve a fair hearing.
Effect on Various Segments of the Vermont Economy
Following are some very rough estimates as the effect of a 40% premium reduction to various sectors of the Vermont economy. The list is not exhaustive and represents the roughest 'order of magnitude' projections.
I note that the Joint Fiscal Office has just produced a document which estimates the potential impact of H.304 on public sector insurance premiums. That document estimates a reduction in premiums for education, municipal, and state employer share in the order of almost 100 million dollars. My estimates for those three sectors are in the order of 115 million dollars, roughly equivalent to the JFO estimate.
As a citizen volunteer on this subject, I, or others outside of government do not have the resources or the expertise to construct these kinds of numbers with any real accuracy. But we do have confidence in the general order of magnitude of the effect as I'm sure you do with the JFO estimates.
However, I added three additional sectors to the analysis, namely the effect of premium reductions on workers compensation, hospital employees, and individuals and private employers, which bring the total premium reductions of all sectors looked at to an astounding almost 350 million dollars. These numbers will have to be tested by the JFO to make sure they are reasonable estimates.
Follow are the sum of these estimates of these fiscal impacts.
|Premium Drop Vermont Employee Categories||Dollar Amount of 40% Premium Drop||Budgets & Taxes Affected by Premium Drop|
|State Employees and Retirees||40 million||State Budget|
|Teachers||52 million||School budgets & Property taxes|
|Municipal Employees||23 million||Town budgets & Property taxes|
|Workers Compensation||24 million||Business, Town & State Budgets|
|Hospital Employees||43 million||Hospital Budgets|
|Individuals & Private Employers||171 million||Business & Family Budgets|
The impact of premium reductions is major. Even though they are order of magnitude, it is possible to begin to see the impact of those reductions on various budgets and to begin to understand the role that health care cost is now playing in all parts of our fiscal lives.
In addition one of the consequences of this approach is the reduction of Catamount premiums by 40%, which suddenly makes the program much more affordable to Vermonters who have considered enrolling but haven't because of the cost.
Overall, this approach would have significant effect on state and local tax dollars, and businesses in two ways, namely reduced premium costs and workers compensation costs offset to some degree if a payroll tax is used.
For example, the reduction of the state budget requirement of about 30 to 40 million dollars is no small event in this fiscally tight environment, and frees up money to address real and present problems in the budget, including opportunities for further investments in health care.
Questions From and Some Answers to the Committee
At this point I would like to address the questions, which is the purpose of this hearing, raised in Jim Hester's 1/30/08 'Summary of H 304 Questions - Revised'.
How is the money raised for H 304?
Answer: That's essentially a job for your Ways and Means Committee, like any other bill. You have the expertise at hand in the Legislative Council to do this kind of analysis and homework, and in fact some work on this question has already been done by the Joint Fiscal Office, with the resulting view that a combination of fees to Vermonters, along with a broad based tax, puts the proposal in the realm of reason.
Using the JFO work as a beginning point, it is feasible to envision that a combination of annual fees paid by all Vermonters, in the order of magnitude of $300 or so, who are not Medicare eligible, along with a payroll tax in the order of 3 to 3 1/2 %, could finance the proposition. This is but one combination of fees and tax that could work. This would be a good starting point for the Ways and Means Committee.
Question I B:
How should the burden of raising the money be distributed among residents and business?
Answer: Part of this answer is embedded in the first question and answer. More specifically, if a payroll tax is chosen as one of the ways to finance, the level of taxation should be low enough that businesses that already are paying for health care end up paying less after the combination of the reduction in the hospital share of premiums and the cost to them of a payroll tax. In effect, businesses that are already providing health care should be rewarded. Those businesses that do not provide health care, even though they will have to bear a payroll tax, will also be winners, as all of their employees will now have a hospital benefit, thus leading to the ability to recruit and retain high quality employees, thus strengthening their businesses.
And certainly, individual Vermonters would benefit by substantially making the health care coverage much more affordable, thus freeing up substantial monies to deal with other important issues in their lives, such as rising energy costs, higher education costs, and even groceries.
This question deserves considerable legislative debate along with the opportunity for Vermonters to weigh in order to address the principle that this committee has endorsed, namely that health care should be financed fairly and done in a way where both business and individual Vermonters win.
Question 1 C: How do we make the funding of the trust fund sustainable over the long term?
Answer: The CPI plus 3% is significantly higher than the CPI rate of growth. However that is significantly less than the 8 to 10% growth in health care costs that we are experiencing over many years now. Which would you prefer?
Also, there are no other ideas on the table that can bring costs down to the level of CPI plus 3%, and certainly no ideas that could bring the growth down to the level of the CPI. And, there are no ideas on the table that can bend the cost curve in a reasonable period of time. Health care costs are going to continue to grow more than CPI. The question is are we willing to bring them down to the lowest point possible, and as quickly as we can?
Questions 2 A,B,C,D regarding boundaries of the bill
Answer: I am not qualified to answer these questions.
Question 3 A: On what basis will the funds be allocated initially and what incentives does this create?
Answer: One suggestion would be to use the existing BISHCA, POC, machinery. The first year's allocation could be based on POC hearings using most recent historical financial data as a first year basis, minus a modest reduction as an incentive to reduce administrative costs. Further, there could be built in a savings sharing formula as a further incentive to reduce administrative costs, which could be shared with the hospitals, with the hospital savings share being used to invest in other longer them productivity initiatives such as technology.
As time goes on, better and better population based adjustments could be included in the allocations.
Further, using existing governmental machinery, there could also be a 'budget adjustment' process employed to address unforeseen fiscal events that were not anticipated in the original allocation. Over time, as the allocation planning becomes more precise, these adjustments would diminish in size and number.
Question 3 B:
How will allocations be adjusted over time; Who from the local community should be involved in negotiating adjustments over time?
Answer: Partially answered above. Local hospital boards and CEOs are representative of a range of community issues and interests, and would serve well in negotiating adjustments over time.
Question 4 A:
Who will make the decision about the rationing of care required to live within this cap at the community level?
Answer: This is the first and only pejorative question. The use of the word 'rationing' is nothing less than a scare tactic. I prefer the term budgeting and the allocation of resources in the best way possible. Every aspect of our lives is subject to budgeting, whether it is our schools, towns, our government, and Vermont families. And regarding 'rationing', who is making the decision to 'ration' out of health care the 65,000 uninsured Vermonters, which is growing by the day? And, why should health care, which represents 16% of our GNP be allowed to have an open ended credit card.
The process envisioned and predicted by H 304 uses the existing machinery of a democratic and visible process to make these difficult decisions.
Finally, H 304 not only will help control the cost of hospital care, but also ensures that EVERY Vermonter will have a hospital benefit, at a cost they can afford.
This bill should be renamed "The Vermonter Peace of Mind" bill.
Current Impact of the Rising Cost of Health Care on a Community
Finally, I would like to read a letter to the editor from the Mayor of Montpelier of some time ago. It states the need for significant change better than I can.
A letter to the editor recently suggested that Montpelier control its' rising costs and thus our tax bill by cutting employee benefits and that some of our employees should be part time-so they would receive no benefits.
What an appalling sentiment-the men and women who fight fires, who respond to crime, and who plow roads, the men and women who are dedicated to keeping us safe and who protect our property should have their benefits cut, should not have health insurance.
It's appalling-and it's very understandable. Some of our residents do not have health insurance, others have very inadequate insurance-yet they pay taxes so, that in part, our employees can have health insurance. In Montpelier we hear that people can not afford to live here or are considering selling their homes because of the cost of taxes. We are concerned about the declining diversity of our city. We are very concerned that some of the people who work for city government can not afford to live in Montpelier. We are very concerned that the people who make this a lively, interesting city to visit, to shop in, to hear music in-can not afford to live here.
Personnel costs are about 60% of our general fund budget and about 20% of our personnel costs are health care. Montpelier works hard to control its health insurance costs, we take advantage of every program available to encourage healthy behavior. We have asked employees to help pay for their insurance-and we will probably ask for them to contribute more over time. We've done everything we can-yet we continue to see this terrible increase in costs. The system is broken and each of us is increasingly carrying the costs of the broken system.
In Montpelier-which this year between the employee and city share will pay total health premiums of about $1 million-we have seen an annual cost increase of about 14% in the past 5 years-and have counted ourselves lucky. During the same period of time our taxes have increased on average less than 2%. We've been pretty proud of ourselves in holding down taxes-but that $140,000 extra dollars we are spending annually on health insurance is coming from somewhere.
Some of it is coming from our employees. We agree with the notion of sharing the costs- but there is a limit to this, so we can't count on this to provide much more in additional savings in the future.
Some of it is coming from essential services. So far we have not been forced to cut fire, ambulance, or police, but we have squeezed them hard-and we have talked about not providing these services to surrounding towns. We have talked about whether or not we should provide ambulance service to people who have not paid-or their insurer has not paid for prior service.
Some of it is coming from those services which make us a better community. Each year we eye services like the bus, the arts programs, the assistance to elderly and disabled-many of these have not received increases in their funding levels for several years. We eye these programs and wonder if this is the year we have to cut them because we do not have sufficient revenues to pay for them-and to support the core mission of a municipality.
So far what it has meant is we are not investing in our bridges and roads; we are not investing in housing development; we are not investing in economic development. We are not investing in our future.
Let me illustrate my point about not investing in infrastructure. Since fy03 our total premium costs have risen about $428,000. That's the total cost of insurance borne by the city and her employees. This year, our capital budget is allowing us to spend about $400,000 on rebuilding our streets, maintaining our bridges, shoring up rock cliffs and so on. The total increase in health care over this 4 year period is roughly equivalent in cost to our entire capital construction costs for a year. If we weren't paying for health care, we'd be doing more for our infrastructure-and holding down taxes.
I mentioned that we were proud that we've kept our tax increases to less than 2%. I've come to appreciate that that is something that all politicians want to be able to say-and we appreciate them working for that. BUT what we have to recognize is that the failure to have meaningful health insurance reform means tax increases. That 140,000 extra dollars we are spending on health insurance annually is a little less than 3 cents on the tax rate. The costs will be hidden, we won't be able to look at our tax bill and see where it is added on, but I can guarantee that your municipal taxes will go up and continue going up as long as there is no meaningful insurance reform.
This is a huge financial issue, but it's also an incredibly important social issue. We should not have letters to the editor which suggest that taxes be cut at the expense of the well being of our employees. The question should not be why do you have more than I have-but why don't we all have the right amount of health insurance.