(05/02) As a result of a massive increase in government health care spending, Vermont is facing an ensuing fiscal crisis. Without major reforms, deficits will balloon out of control and valuable programs will be lost.

Almost 140,000 people, a quarter of all Vermonters, receive some form of health coverage assistance from the state. If the current trend continues, working class Vermonters will be crushed under the burden of escalating tax rates and ever growing government spending. We should measure compassion not by how many people receive state aid, but by how many people do not need it.

In Fiscal Year 1992, total Medicaid and state health care spending cost taxpayers $244 million. In Fiscal Year 2001, cost to taxpayers topped $618 million, an increase of 154% over 10 years. Nationwide, Medicaid spending only increased about 102% during that same time frame. If Vermont grew at the national average rate, taxpayers would have saved $127 million.

For Fiscal Year 2002, spending on health care is expected to grow to about $700 million, a 13% increase in one year. No state and federal revenue stream, income tax, sales tax, payroll tax or any other tax can keep pace with that growth in spending. In fact, without any major reform to Vermont’s program, our Joint Fiscal Office has projected a $300+ million deficit in 5 years.

The reason Vermont is facing this crisis is because politicians in Montpelier continue to rely on government programs instead of sensible market solutions to the problem of affordable health care. The purpose of Medicaid is to provide help to the very poor. The purpose of the Vermont Health Access Plan (VHAP) is to provide affordable state insurance to low income workers who lack access to health insurance. Dr. Dynasaur provides state health coverage for children whose parents earn up to $54,000 a year. The Vscript and Expanded Vscript program offers pharmacy relief for those earning between $15,505 and $22,000 (single). All these programs have noble goals, but their effect on the Vermont’s financial health is devastating.

The Governor has proposed changes to health coverage in next year’s budget. He’s increased co-pays and eliminated programs like adult dentures, chiropractic and podiatry coverage. Pharmaceutical coverage for those with incomes in excess of 176% of the federal poverty level, about $20,000 for a couple, was eliminated. For those earning less, a $750 deductible was established before full costs are covered by the state. All health programs for children were preserved.

The biggest state health cost increase is pharmaceuticals. It’s been growing around 18% a year and is currently projected to be in excess of $105 million this year. That’s why half of the Governor’s $11.8M (state money) cuts are in this area.

The Governor also reduced state health care reimbursements to hospitals and provided no change in compensation rates to dentists and doctors. These actions exacerbate the cost shift problem to employers and the private health insurance market.

Despite the effort to stem the rapid growth of health coverage in this year’s budget, some are asking for more federal money and/or increase state taxes to expand government’s role. Advocates affected by rescissions are vocal and determined to restore the cuts regardless of the threat of impending deficits. As long as someone picks up the tab, demand will increase for these services, which many now consider entitlements.

The House realized that with state health insurance costs growing between 10-12% a year and our state revenues only growing 4% or less, the program isn’t sustainable. Even with major tax increases on tobacco, the deficit problem will persist. Although the Governor proposed program reductions, more significant reform is required to create a plan that’s affordable.

During the budget process, the House appropriation committee was called to the Governor’s office. The Governor indicated our benefit programs are among the most generous in the country and that we should protect the most vulnerable, but not be as charitable with those with higher incomes. Dean further said many advocates will be vocal in opposing benefit reductions, but cuts are required because Vermont’s economy can’t afford them. He advocated for a sustainable plan.

The House-proposed plan calls for restructuring the health care system to give patients more options, empower individuals rather than government bureaucracies, and require the state to annually match benefits with revenues. It calls for vouchers, more cost sharing with a sliding scale to protect the federal mandated services for the most vulnerable. It also asks for greater flexibility in the offering of optional services and a waiver will be requested from the Bush Administration seeking permission to implement these changes and construct financial stability in 2004.

The House restored some of the cuts made by the Governor, but required larger co-pays and increased out of pocket spending before state programs offer relief. The cost shift to private insurance was addressed by proposing a small cost of living increase to hospitals, doctors and dentists. It also called for a 36-cent cigarette tax to fund the projected $15M deficit for FY03.

Currently Vermont’s state health care policy promotes government programs as the answer to what ails our health care system. They aren’t. The current problems in growth and high private insurance costs are the result of burdensome government health programs and regulations placed on the market. With the House action, that will change.

Thank you for your calls and notes. I can be reached at 658-3975 (home), 228-2228 (State House) and via e-mail.

Rep. Frank Mazur
South Burlington