Published January 1, 2006
A great divide
Can the governor and the Legislature agree on health care reform?

By John Zicconi

Rachel Alexander is employed full time, and recently became eligible to participate in her company's health insurance plan. The timing appeared to be perfect as the Clarendon resident needed surgery to repair a hernia that had been bothering her for months. But when faced with the decision to sign up for the company health care plan, Alexander made what many would consider an odd choice.

She declined to participate, and just before Thanksgiving had the hernia operation while she was uninsured. The 34-year- old is now paying her doctor bills – which total more than $2,000 – out of her own pocket through an installment plan. "I worked out a schedule with the anesthesiologist, and another payment plan to pay the surgeon," said Alexander, who makes $10 per hour as a marketing assistant. "It's not cheap."

Rutland Regional Medical Center, where the surgery was performed, agreed not to charge her, Alexander said. The estimated $4,000 hospital bill will be written off as part of the $1.2 million in free care Rutland Regional annually provides to those who need financial assistance, said Larry Jensen, a hospital spokesman.

Alexander chose to remain uninsured because even if she joined her company's health plan it would not have helped. She developed her ailment before being hired by Knight Kitchens five months ago, and the company's BlueCross BlueShield policy would not pay for her operation because the hernia was a pre-existing condition, she said.

Forced to pay her own doctor bills, joining the company health plan would cost her money at a time when she has none to spare, Alexander said. The company picks up only 50 percent of the plan's premium, meaning she would have to contribute about $50 per week even though the coverage did not pay for her operation, she said.

"Knowing I'm already going to have these huge medical bills, I can't afford to have $50 taken from my paycheck," Alexander said. "I've got rent and other bills to pay. ... I can't afford to have health insurance."

The cruel irony of Alexander's situation is not lost on state lawmakers who have vowed to make universal health coverage for all Vermonters their top legislative priority in 2006. For Alexander is among the estimated 11 percent of Vermonters who do not have medical insurance.

Democrats who control both the Vermont House and Senate last spring passed legislation that required all Vermonters to have health insurance. The bill would have eliminated traps like the one that caught Alexander because she would have been insured at the time she developed her ailment.

But Gov. James Douglas vetoed the bill. He was unhappy with other parts of the legislation, including one measure calling for a payroll tax on businesses that do not provide insurance to employees and another measure that would have increased income taxes on the uninsured.

Vermont's Republican governor also said the Democrats' proposal was the first step toward establishing a government- funded, single-payer health care system, which he greatly opposes.

The two sides vowed to return to the table and craft a health care bill they can all agree to when the Legislature reconvenes this month, but political observers have their doubts.

The governor and Democratic leaders have strong philosophical differences on how to reform the state's $3.5 billion health care system. The governor favors universal access to reasonably priced private insurance, while Democrats want the state to provide health care coverage for all, which is something completely different.

"The governor is much more incremental in nature, while the Democrats are into dramatic change," said Susan Gretkowski, a lobbyist whose clients include pharmaceutical and health insurance companies. "If the Democrats are going to continue with a long-term plan that universal access will be provided by the government, I don't see how that gap can be bridged."

The political showdown over how Vermont tempers the rising cost of health care and provides coverage to the state's estimated 65,000 uninsured is expected to be the main event during the legislative session.

Largely unchecked, health care spending in Vermont increases about $1 million per day. Lawmakers do not believe this growth is sustainable, and point to the escalating number of businesses that are cutting health coverage from their benefit package as proof.

The number of companies nationwide offering health benefits to employees fell to 60 percent in 2005, down from 69 percent in 2000. The reduction is largely blamed on skyrocketing costs, which rose an average of 11 percent annually during the same time period.

A recent survey by AARP Vermont found that when Vermonters lose their health coverage they often remain uninsured for years. The poll, released in October, concluded that more than half of uninsured Vermonters have been without coverage for two years, and 40 percent have been uninsured for five years or longer.

Both Senate President Pro Tem Peter Welch, D-Windsor, and Speaker of the House Gaye Symington, D-Jericho, called these trends "alarming." Lawmakers recently held a series of health care forums around the state to gauge public support for change, and have vowed to avert what they believe is a looming crisis.

"People are hurting, they are scared and they are freaking out because they don't have insurance," said Rep. Lucy Leriche, D-Hardwick and a member of the House Health Care Committee. "I felt crisis everywhere we went. People are relying on us to do something comprehensive and meaningful."

Across the political aisle, Rep. Francis "Topper" McFaun, R-Barre and also a member of the House Health Care Committee, was less emotional but acknowledged that as he traveled the state Vermonters overwhelmingly told him everyone should have access to health care. "I heard that everywhere," said McFaun. "One of the things that came across loud and clear is the cost of health care needs to be controlled."

Mark Neagley, president of Chase-Neagley Construction, a South Burlington firm that employs 55 workers, is one of many Vermont business owners who has made tough and unwelcomed financial decisions regarding health care.

His firm provides coverage to workers and their families, but instead of paying 100 percent of the health plan's premiums as it did eight years ago, the company has slowly shifted a significant portion of the financial burden to workers. The company first asked employees to pay 10 percent of their premiums, then 20 percent. This year it called for 30 percent. The trend, one that is being followed by many other employers around the state, is slowly eroding workers' take-home pay.

"If we could do more we would do more," Neagley said. "But there is only so much money in the till."

Neagley said his small company, which does about $20 million in business each year, dishes out some $300,000 annually in health care premiums.

"For us, that is not a small amount of money," Neagley said. "Our decisions are basically based on raw numbers. We only have so much money. … Benefits are a fixed amount of your company's budget."

Gary Cahill has worked for Neagley since the late 1990s, and has experienced the premium cost shift. He used to pay nothing for his health coverage. Insuring his family – a wife and two small children – now costs him $95 per week or nearly $5,000 per year, he said. "It certainly has had a negative impact on my income," said the 41-year-old project manager. "We have raises every year, but when countered by increases in my insurance we are not keeping up with inflation. I make less and less every year. It's frustrating."

Cahill said there are many things he could do with an additional $5,000 per year – "pay off some debt, take a real vacation or put braces on my kid's teeth when they need it" – but he does not blame his employer for the cut in his purchasing power.

"If anything, I blame the state," said Cahill. "But I think most people like myself are in the dark about what is causing it. But who doesn't want something done about it?"

Lawmakers said they hear too many stories like Cahill and Alexander's. Vermonters are demanding change – they want everybody covered and they want the skyrocketing cost of health premiums controlled.

Democrats say these two seemingly opposing things can be accomplished, but for it to happen Vermonters must be willing to change the state's entire approach to delivering health care along with its payment system.

"Tinkering around the edges is insufficient to deal with the magnitude and complexity of the problem," said Sen. James Leddy, D-Chittenden, who is chairman of the Senate Health and Welfare Committee.

Lawmakers have yet to propose a plan, but promise they will before the legislative session ends.

A successful plan will focus on preventive care for all as a way to curb future spending. It will also focus on better treatment of costly chronic diseases like diabetes so that those needing medical attention will cost the system less, Democrats said.

Key elements include ensuring that everyone has access to care, and changing the way both physicians and hospitals are paid to treat patients by placing a higher financial focus on medical outcomes rather than how many times a patient sees the doctor, they said.

Details of this approach are still being discussed, but lawmakers have said physicians should be paid a flat fee for treating a diabetic, for example, and not be able to charge separate fees for each office visit unless extraordinary situations arise.

The theory behind this approach is that doctors will treat the disease more efficiently and with fewer administrative costs if they are not constantly chasing money, and patients as a result will receive better care.

Successful change also will require a shift not only in who pays the state's medical bills, but how that money is collected. Companies that now do not offer health care benefits to employees, along with people who are uninsured and are self employed, must contribute to the new system for it to work, Democrats said.

Last year Democrats proposed levying a special income tax on the uninsured and a special payroll tax on business that do not offer health benefits to pay for such a system. The governor objected, and the payment system was rejected along with the rest of the Legislature's reform initiative.

"The goal is not to have health insurance for all Vermonters as the governor proposes, it is to have affordable health care for all, which is different," said Rep. Janet Ancel, D-Calais.

A former tax commissioner under Gov. Howard Dean and a member of the House Health Care Committee during 2004, Ancel this fall was reassigned to the tax-writing Ways and Means Committee to help that panel understand health care issues.

Ancel has no illusion that lawmakers will cure all the state's health-care ills this legislative session. Successful reform will take several years to design and implement, she said.

"But if we make progress during the next legislative session towards the goal of making health care affordable for all, we will be successful," Ancel said. "But at this moment, I can't tell you what progress means."

The reason Ancil and others can't say what 'progress' might mean is because the political fight over the issue has not yet been waged.

Liberal Democrats and Progressives want wholesale change almost immediately, some favoring a single-payer system under government control financed largely through taxes.

Moderate Democrats say a slower path to universal access is necessary. One that will leave some medical procedures for some people uncovered in the short term as a new health system is put in place step by step over several years, one that is financed through both pubic and private sources.

Most Republicans, including the governor, don't want to mandate health coverage or raise taxes to finance changes. They like the current employer-based financing system, and look primarily to soften insurance regulations so that low-cost, high-deductible plans can be developed for those without coverage.

"We are all looking at a goal of health care for all Vermonters (and) the question is how do we do that?" said Malcolm Severance, R-Colchester, a member of the House Health Care Committee. "We need to focus on how far we can go initially to arrive at that goal," Severance added. "Is this evolution, or revolution? Do you outline the steps to get there, or have revolution and get there all at once? That needs to be discussed."

Despite all the meetings, despite all the road shows, those who follow the Legislature and governor's office closely say they would be surprised if any significant reforms actually occur this legislative session, and the reason is because the left-leaning Legislature and the right-leaning governor are philosophically too far apart. They have very different ideas about what health care reform might entail.

Douglas in October, shortly after holding his own health-care sessions, announced he wants to split the upcoming reform debate into two parts: a bill that contains the cost-saving measures he and Democrats can agree on, and a separate bill that deals with everything else.

Dubbed the "consensus" plan (see accompanying box) by administration officials, the governor's initiative is designed to achieve swift political agreement on at least something. Douglas has called for this 'consensus' legislation to be passed within the session's first 45 days. The plan would focus primarily on saving money by reforming how the current health care system is administered.

Democrats say they have no real issue with the proposal – many elements were included in the health-care plan that Douglas vetoed last spring – but they are criticizing the proposal because they say it would do little to reduce the number of uninsured.

"This is not health-care reform," said House Speaker Gaye Symington, D-Jericho, shortly after reading the 12-pronged proposal. "Making sure all Vermonters have access to affordable health care is not on the list."

Political observers view the bifurcation of reform efforts as a sign that the governor has little hope that he and Democrats can reach agreement on anything that would substantively change the way health care in Vermont is delivered or financed.

"I don't think he is willing to come further than those 12 points," said Paul Forlenza, a health care lobbyist whose socially liberal clients include the Vermont Public Interest Research Group and Vermont Health Care For All. "I'd be shocked if the governor plans to do anything other than those 12 points, claim victory and move on."

Douglas can do that because his Republican constituency is not calling for major reforms, Forlenza said. Democrats were swept into power in 2004 largely on a platform that includes significant reforms and they must accomplish more, he said.

"The Democrats have to make a bigger step than the governor," Forlenza said. "The Democrats are not going to feel satisfied unless they get more than those 12 points. The Democrats have to go back (to the campaign trail in 2006 being able to) tell people about the vision aspect of what they have done."

Privately many Democrats acknowledge they can only go as far as the governor will let them.

Although they will work on a separate package of reforms so they can show their constituents they have larger goals, Democrats in the end are expected to play ball with the governor's consensus plan as long as they can add a few things, both liberal and conservative lobbyists said.

Exactly what they wish to add is unknown, but the final product will have to include some kind of roadmap designed to show the public how the consensus plan fits into the more far-reaching goal of universal access to health care for all, they said.

"Democrats will try to make sure their long-term direction does not get lost," said Leigh Tofferi, a former Democratic lawmaker who is now director of government affairs for Blue Cross, Blue Shield of Vermont. "For the administration, the question becomes: Is that something they are willing to let the Legislature have."

That struggle was evident during a recent gubernatorial press conference. When asked how Democrats were warming to his consensus proposal, the governor expressed disappointment that lawmakers want to stretch it into a larger package. "They talked… about establishing a framework for moving forward with the second phase of reform," Douglas said. "A consensus package has to be items by nature that are not controversial. We all agree we have some areas were we don't agree, and those will be part of a [separate effort] were we will have to work out thornier issues and differences of opinion."

Douglas said he did not view his consensus plan as complete health care reform. He promised to develop ideas that will provide affordable insurance plans to both businesses seeking to offer coverage to their employees, and for Vermonters looking to purchase coverage on their own.

"I certainly want to do more because I want to make sure everybody has access to coverage," Douglas said. "Democratic legislators have different ideas on how they want to accomplish that."

That twain is unlikely to meet anytime soon, which is why Democrats are insisting that the governor broaden his view of what can be included in a consensus package and link it to greater reforms that will be worked out in the future, said Rep. Harry Chen, D-Mendon, a member of the House Health Care Committee. "It's one thing to take a small step, declare victory and not try to (substantially) change things," said Chen, who is an emergency room physician at Rutland Regional Medical Center. "It is another thing to take a small step with some grander vision."

Chen, like other Democrats, accused the governor of playing politics by outlining what he wants to accomplish and then labeling it a "consensus" strategy. They want the plan to include steps that will provide health care to the uninsured before they will allow it to become law.

"It's premature to call it a consensus plan," Chen said. "We have to come to a consensus on the consensus plan. There has to be pieces of it that are consistent with our vision."

Republican legislators largely support the governor, but acknowledge that everyone right now is holding back on how far they will bend because it is too early in the political poker game to show all their cards.

Douglas before the legislative session is over will compromise and agree to add provisions to his 12-point consensus plan, Republicans said. They said the bigger question is: Will he bend far enough to satisfy Democrats.

"He has to move some, but he can't move too far," said Sen. Kevin Mullin, R-Rutland and a member of the Senate Health and Welfare Committee. "Politically, people have boxed themselves in by making health care the focal point of the upcoming session," Mullin said. "Nobody can walk out of here without doing something to one: make health care more affordable, and two: make sure some people without health care have insurance."

The governor's consensus plan does not immediately do either, which will force him to compromise, Mullin said.

"Everything depends on where you think the consensus has to be, and those conversations have already begun," Mullin said. "Politics is the art of the possible. Both sides have to decide what is possible, and how far they can go without breaking."

John Zicconi is a member of the Vermont Press Bureau, the Statehouse bureau of the Times Argus and Rutland Herald.