Vermont passes health insurance reform plan

Doctors appreciate the program's promise to cut red tape and its focus on chronic illness.

By Elaine Monaghan — Posted June 5, 2006

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Washington -- Vermont physicians hailed their state's entry last month into a growing club of those that have bridged political differences to cover the uninsured.

Gov. Jim Douglas, a Republican, and the Democrat-led Legislature forged a compromise measure last month that is expected to cut the number of uninsured by nearly half in the short term, reduce costs and address the growing need for chronic care. They were guided in this effort by Kenneth E. Thorpe, PhD, a former Clinton appointee and professor at Emory University's Rollins School of Public Health in Atlanta.

At press time, the governor was expected to sign the bill into law May 25.

"There's a certain sense of pride that in our state everyone involved in the process seems more interested in the end result than in the politics," said Peter Dale, MD, president of Vermont Medical Society and an internist in Berlin, Vt.

"The result is a step in the right direction. A lot of people are using that language because we all realize there's a long way to go to make the health care system more rational and dependable when it comes to providing good patient care," Dr. Dale said.

Passage of Vermont legislation follows action in Massachusetts, which instituted an "individual mandate" that penalizes citizens who fail to accept subsidized insurance and charges some businesses if they don't cover their employees. Michigan Gov. Jennifer Granholm, a Democrat, has also expressed determination to tackle the problem of the uninsured in her state, where she'll have to work with a Republican Legislature to get anything passed.

The American Medical Association wants coverage for low-income people and children to be expanded incrementally in the short term. In the long term, the Association seeks a market-based plan that uses tax credits and insurance market reforms to boost coverage.

The Vermont vision

Vermont created a program that relies on private insurers offering a single, standard, state-approved plan that is voluntary for patients. Patient charges for preventive care, such as mammograms, and for recommended services for chronic diseases, such as diabetes, will be scrapped. Dr. Thorpe believes the bill's new approach to chronic care, with an emphasis on prevention, early treatment for all Vermonters and paying doctors to coordinate care, will save the state's health system $550 million over 10 years.

Blue Cross Blue Shield of Vermont and MVP Health Care, the state's largest managed care organization, have already said they will participate in the plan. The program, called Catamount Health, may become mandatory in 2010 if the state fails to achieve its goal of having 96% of Vermonters covered, up from 90% now.

The state will assume 40% of the program's cost, with the federal government anticipated to cover the remainder. Some state funding will come from a 60-cent hike on cigarette taxes, which will begin on July 1 and then increase another 20 cents two years later to $1.99 per pack. The other state revenue source will be employers, who will be fined if they fail to offer insurance or if their employees are allowed to decline coverage despite being uninsured elsewhere.

There will be no penalty for the first eight uninsured employees until 2009, when the number drops to six, then to four in 2010. Firms will be charged $365 per uninsured person, a fee that will increase in line with premiums. Beginning April 1, 2007, the assessment will be charged quarterly, based on the number of full-time employees plus the total "full-time equivalents" represented by part-time and temporary workers.

The state protected its fiscal integrity by imposing a cap on enrollment if costs exceed revenues.

Premiums will be subsidized on a sliding scale for anyone earning below 300% of poverty, or $60,000 for a family of four. Vermonters will qualify if they are not covered by state programs, are uninsured for 12 months, or if they lose coverage through job loss, divorce, dissolution of a civil union or death of a primary policy holder.

The program will also help uninsured employees who are eligible for insurance at work by contributing to their premiums and costs for chronic care. These two expenses cost the state more than $3 billion a year, or 75% of all health spending, Dr. Thorpe said.

Catamount Health is projected to have administrative costs of just 4%. The proposal includes investment in information technology, patient safety and error reduction, and slashing of red tape for physicians. Common claims forms, a health information technology initiative and electronic billing are also part of the plan.

Physician payments will be higher than Medicaid and Medicare but lower than private insurance. Medicaid payments will be brought more in line with those of Medicare, pleasing Vermont's physicians.

About 25,000 of the state's 60,000 uninsured are expected to be covered immediately when the new plan becomes available on Oct. 1, 2007.

Vermont's step-by-step approach is illustrated by its plan for a review in January 2009, when it will consider eliminating or cutting the 12-month waiting period and allowing the underinsured and employers to buy into Catamount Health.

Dr. Dale said one of the challenges to physicians now will be to ensure that the plan really does cut back on paperwork and administrative needs, a subject that will be the focus of a new state commission.

Vermont doctors are clearly approaching the reforms with a critical eye. Stuart Williams, MD, a member of the state medical society council and family physician in Berlin, Vt., said his reaction was "mixed."

"This program will still rely on the private insurance industry, and there would be greater administrative cost savings with a single-payer reimbursement system," Dr. Williams said. "But it's progress, so I look forward to working with it."

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Catamount plan

  • Offer subsidies on a sliding scale to residents earning up to 300% of the poverty level.
  • Require insurers to pay doctors Medicare level fees plus 10% and pay hospitals 110% of cost.
  • Potentially force insurers to participate if necessary.
  • Create premium discounts of up to 15% for patients who comply with a health promotion program.
  • Require use of a standard, single credentialing form to simplify paperwork.
  • Set deductibles from $250 to $1,000 depending on whether care is in or out of network, set coinsurance at 20%, and set maximum out-of-pocket spending ranging from $800 for a single person in network to $3,000 for a family out of network.
  • Waive deductibles and cost-sharing for participants in chronic care management.
  • Be funded by revenues from a hike in tobacco taxes and a $365 business tax per uninsured "full-time equivalent" worker.

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