Originally published on Vermont Digger in March 2015
Gov. Shumlin has proposed a .7 percent payroll tax, the main purpose of which is to address the so-called Medicaid cost-shift. The bulk of the new revenue would be used to draw down federal matching funds thus allowing Vermont to more closely align Medicaid reimbursement rates with those of Medicare (Medicaid currently reimburses at around 60 percent while Medicare’s reimbursement rate is closer to 80 percent). Gov. Shumlin has committed that this way of addressing the cost-shift will result in a 5 percent reduction of private insurance premiums (though the Green Mountain Care Board (GMCB) is not making the same promise).
Leaving aside the important yet unanswered questions about whether the cost-shift actually exists, and if it does, the degree to which it occurs, there is ample skepticism in the General Assembly about whether the payroll tax is a good idea. While still on the table, the payroll tax may not make it to the governor’s desk this year, or ever. Consequently, the Legislature should consider alternative ideas that would reduce the impact of the cost-shift. The clearest and most plausible idea is to increase health care price transparency.
The lack of price transparency is a problem because without it Vermonters would not know that it costs $1,284 for a typical blood draw at UVM Medical Center while the same procedure costs $276 at Rutland Regional Medical Center and $233 at Central Vermont Medical Center. Mount Ascutney Hospital & Health Center costs the least amount at $175. This is not to say that Vermont consumers are going to drive two hours out of their way for a blood draw, but these variations in pricing should be cause for concern and should trigger our lawmakers and regulators to do something about it. This level of variance for the same procedure simply should not exist. More comprehensive and more shocking is an August 2014 GMCB Price Variation Analysis.
That study revealed significant unexplained price variances for three of the four service areas studied – Evaluation & Management Office Visits, Medical & Ancillary Visits, and Surgical Visits (page 8 of the report):
The report says that an unexplained variance could be attributed to “a unique payment adjustment negotiated between a payer and a provider, an individual provider’s historical method for setting charges, and a special circumstance that the payer did not report in the claims data for the specific service provided.” The report also stated that “[i]n the aggregate, price variation contributes to total health spending, particularly as a result of the lack of transparency in prices. All else being equal, use of providers with lower prices will reduce the state’s total health care bill.” Finally, the report also made this policy recommendation: “Transparency: The GMCB will post standard payment methods and rates online on a consumer-friendly website and in formats that payers and providers can easily download and apply.” In fact, this policy goal is embodied in 18 V.S.A. § 9410(a)(1)(E) which states “The [GMCB] shall establish and maintain a unified health care database … providing information to consumers and purchasers of health care.” So how is the GMCB doing on the report’s policy goal and its statutory obligation? Not very well.
Vermont is behind the times when it comes to making pricing information available to consumers. In a March 2014 report conducted by the Health Care Incentives Improvement Institute, Vermont got an F for its state-mandated website. To be fair, many other states got the same grade, but this does not reflect well on Vermont given our goal of wanting to be seen as a national health care leader. Compare our “system” to those of our neighbors to the east. In order to find pricing information, old information at that, Vermont consumers must wade through numerous PDF files located the Department of Financial Regulation’s website. Vermont’s method is at least 10 years old in terms of how it delivers information via the Web. On the other hand, New Hampshire and Maine both got C’s and while not stupendous, they both have functional and far more convenient, and modern, Web-based systems. The link to Maine’s website is here and New Hampshire’s here. Their sites are quick and interactive.
Doug Hoffer, Vermont’s auditor, has been one of the few champions of improved health care price transparency and has been critical of Vermont’s progress. For a time, GMCB Chair Al Gobeille also appeared to be a champion, at least according to a WPTZ news article from June 2014. That article highlighted the importance and necessity of increased price transparency. In fact, the minutes from the Oct. 23 GMCB meeting indicate that the board was moving forward with a new consumer-based system after entering contract negotiations with Human Services Research Institute to build a similar system for Vermont under VHCURES 2.0 (anything that’s “2.0” must be good and must be with the times, right?). By the end of 2014, it looked like the GMCB was on its way to addressing the state auditor’s concerns. However, by February of this year, Gobeille appears to have cooled to the idea of having price transparency. According to a recent Vermont Inquirer article, Gobeille now believes that price transparency could actually drive up prices if consumers choose the more expensive providers, believing higher prices means higher quality.
Chairman Gobeille’s concerns are not without merit, but there is no reason why information about quality cannot be linked or integrated with a new website, e.g., linking to www.healthgrades.com or www.propublica.org/
This is unfortunate and is inconsistent with the objectives Vermont has set for itself. I have witnessed first-hand how recalcitrant those in the health care industry are to increased transparency and that should be testament to why it is a good idea. I have worked with a company at the forefront of pricing transparency, Castlight Health. Transparency works, but to do so requires the will to break down walls that are very thick. Transparency is the foundation of reduced health care expenditures and greater efficiency. Let’s not waste this opportunity to get something done whether it’s instead of or in conjunction with the payroll tax.