The Joint Fiscal Committee Vermont General Assembly
September 23, 2005
I respectfully submit this statement to the members of the Joint Fiscal Committee of the Vermont General Assembly. Thank you for extending this opportunity to Families USA.
My name is Ron Pollack, and I am the Executive Director of Families USA, a national, nonprofit health care consumer advocacy organization based in Washington, D.C. Our mission is to bring the voices of health care consumers to policy debates at both the state and federal levels. An important focus of our work is ensuring that low-income people have access to affordable, comprehensive health care coverage.
We are dismayed by the proposed "Global Commitment" Medicaid waiver. I want to emphasize to you that our concern does not arise from inflexible ideology or preconceived notions about the "best" way to provide health coverage and health care to low-income people. We have one-and only one-test to evaluate Medicaid proposals: Will this proposal help or hurt low-income people? Our evaluation of the Vermont Global Commitment Medicaid waiver concludes that the waiver poses a serious threat to the people who must rely on Medicaid for health care coverage. It is, in fact, the most dangerous and far-reaching change to a state Medicaid program that we have seen emerge from any state.
Many questions about the Global Commitment proposal remain unanswered and many details are not yet known. Rather than discussing all of them, I want to focus my comments on the issue of financial risk and the undermining of the financial partnership that now exists between Vermont and the federal government. While it is understandable that the administration and the General Assembly would look for ways to save money and to operate Medicaid efficiently in Vermont, you should be aware that the Global Commitment waiver serves the federal government's financial interests-not Vermont's.
The five year global cap in the proposed waiver is insurance for the federal government-in essence, it transfers financial risk from the federal government to the state of Vermont. If you go down this road, you are betting that nothing unforeseen will happen to affect your Medicaid program over the next five years: There will be no recession, no rise in unemployment, no unexpected increase in health care costs, no epidemic or other public health crisis. Is this a smart bet? Is it a bet you need to make at all? I would strongly encourage the Joint Fiscal Committee to carefully consider all aspects of the Global Commitment Medicaid waiver and to take the time to know exactly what bargain you would be making with the federal government. You may find that the deck is stacked against you.
I don't have a crystal ball that will give us a clear picture of the next five years. I can offer you a couple examples of unpredictable events that could drive up the cost of your Medicaid program. Today, the obvious example is the Hurricane Katrina catastrophe. Besides the obvious, heart-wrenching effects on survivors, Katrina threatens to drive up oil prices (gas, heating fuel) and put enormous strains on every state's economy. The federal government's spending patterns and decisions about the 2006 federal budget in the wake of Katrina will also affect every state.
Here is another example. Like me, you have probably been reading news coverage discussing the very real threat of an influenza epidemic in the near future. Experts predict that a flu epidemic of only mid-level severity could result in 147,245 flu cases in Vermont, with 1,185 additional deaths and 5,213 additional hospitalizations.1 What would this mean for Vermont's Medicaid spending levels? Under the Global Commitment spending caps, it would mean that you would be "all alone and on your own" as you struggled to pay for the added cost of the epidemic-the federal government would not be a financial partner and would not match state spending to help cover the added costs.
As you look at the Global Commitment proposal, ask yourselves, "What is the federal government trying to accomplish? What will the federal government get out of the deal- and at what cost to Vermont?" Can Vermont secure its goals without the financial risk of federal funding caps? Obviously, the state wants to find savings in the Medicaid program. A core element of the waiver proposal is the shift to an increased level of managed care penetration in your Medicaid program. This shift could be tried without linking it to the drastic step of accepting absolute federal funding caps. Linking managed care and funding caps is dangerous: while you may realize savings in your Medicaid spending from managed care, the dollar amount of these savings will be hard to predict before you have at least a year or two of experience and a chance to "tweak" the details.
If you do decide to seek a managed care waiver, I hope you will take the time to carefully examine the intergovernmental agreement that is, in essence, a contract between two state agencies, the AHS and the OVHA. Although this is a unique situation, and it differs from other managed care arrangements in which states contract with outside entities, you may want to consider incorporating the kinds of criteria that other states have used to ensure that reasonable protections for both patients and providers are built in. (It is my understanding that as of today, September 23, 2005, that the Joint Fiscal Committee has not seen the specifics of the Intergovernmental Agreement-which is specifically referenced in item 21, page 5, of the Special Terms and Conditions, dated September 13, 2005.)
The Vermont Global Commitment Medicaid is the equivalent of someone putting himself into a straight-jacket, then finding that he can't use his hands to break a fall. At the federal level, this concept of "block granting," or constricting the federal financial support to state Medicaid programs, was rejected by the National Governors Association in 2003. After thorough examination, vetting, and debate (and in spite of some broad initial support), the governors rejected the concept of federal dollar caps.
I would respectfully ask you only this: Would it not be prudent for the Joint Fiscal Committee to also allow for adequate time to thoroughly examine and debate the merits of the Vermont Global Commitment Medicaid waiver proposal? This is a bet with high stakes. At risk are the lives of Vermont's most vulnerable residents, who will, in the end, pay the price if Vermont's bargain with the federal government leaves the state coming up short.
Thank you.
1 Projections are based on the federal Centers for Disease Control and Prevention FluAid 2.0 program. The FluAid program is built using U.S. Census data gathered in 1999. If current population estimates were used, the numbers would be higher for all impact measures.
