Vermont Governor’s Financing Report for Universal Health Care Calls for Equity But Lacks Commitments

The Healthcare Is a Human Right Campaign, led by the Vermont Workers' Center, presented a human rights analysis of the Shumlin Administration's health care financing report to the Vermont House Committee on Health Care on January 30, 2013.  Key points of analysis follow below; the full testimony can be downloaded at the bottom.

[…] With the report submitted to the legislature a few days ago, the administration chose not to provide an equitable financing plan for GMC.  We understand that they are looking to set out a process for doing so, yet this report does not offer any guidance for that. Instead, the report commissioned by the administration confirms the obvious — that a public healthcare system will provide better access to care at lower costs than a private, market-based system. We welcome this most recent projection, which follows a great number of similar calculations, yet we doubt that this basic fact will contribute much to public understanding and support for healthcare reform. In fact, the focus on cost-savings at systems level risks overshadowing people’s real concerns along with the real purpose of reform: guaranteeing everyone access to care independent of payment and thus improving people’s health. We must treat healthcare as a public good and a human right not because it will be cheaper, but in order to protect and care for people’s health. We will not achieve this overarching goal unless we apply the human rights principles in Act 48 to any cost analyses and options for funding sources.

Because it was the legislature that put these goals and principles into law, we believe that it is now time for this body to take an active role in this process and set out parameters, based on the principles of Act 48, for the most equitable way of financing our universal system. 

As you review the GMC financing report commissioned by the administration, please allow us to illustrate how the basic principles in Act 48 can help assess the approach, assumptions and findings of this report. 


• We are concerned that the report authors may not have fully recognized the impact of universal, publicly financed healthcare on the entire Vermont population. Despite the report’s focus on costs, it shows an insufficient understanding of cost drivers in a market-based system and the cost savings in a system focused on universal preventive and primary care. At this point in the reform process, we believe that you will share our surprise at the report’s odd assertion that a “competitive marketplace” in healthcare has kept costs low. What is being measured here? The sad fact is that denied claims and underinsurance have not only damaged people’s health but also increased costs to the system as a whole. We are all reminded of the failures of this market-based system on a daily basis. More specifically, we find it unhelpful that the report attempts to cost the utilization of services without projecting changes in health needs or in the types of services needed in a prevention-focused system.  It is particularly misleading to assume that costs increase due to “induced utilization,” i.e. that people with lower or no cost-sharing will drive up costs due to higher utilization. In fact, there is much evidence to contrary: greater utilization of care at the appropriate place and time reduces overall costs by avoiding emergency care and chronic conditions. In summary, when calculating costs the report suffers from neglecting the impact of a universal system whose purpose it is to keep people healthy. 

• The report also fails to comprehend the possibilities of universal healthcare on another important level. The provision of healthcare is different from the provision of insurance against falling ill.  As I said earlier, there is no need to think of GMC as yet another insurance model, to conceive of it as a health insurance plan with a specified actuarial value and a particular benefits package . We have the opportunity and, we would argue, the obligation, to shift from coverage to care, that is to provide access to all needed care without the restrictions and barriers entailed in an insurance product. 

• Unfortunately, the report does not even consider such a shift. It sees GMC as an insurance product with a default actuarial value of 87%, which user fees of 13% would be imposed on most patients. Against the legislative intent expressed in Act 48 (§1825 (a)(2)), the report even calculates a plan of 80% actuarial value. Most of you will be aware that we strongly object to any type of user fees, which shift the cost burden on those who most need care. There is a large body of research evidence, which we have compiled, which shows that any user fees deter access to necessary care and contribute to poorer health outcomes and higher system costs. Once again we are asking why this report has not attempted to calculate the cost savings achieved through timely and appropriate access to care? Eliminating user fees is not a luxury, it is essential to the goals of universal healthcare.  

• We were also hoping to see a firmer stance from the administration on the unified nature of GMC, which, after all, is a key source of the much heralded cost savings. More importantly, as the HCHR campaign puts it, universal means everyone. While we appreciate the report’s recognition that a universal system entails automatic enrollment, we are concerned about assumptions that a significant number of people could keep their employer coverage. We see no intent in Act 48 to enable a continuation of the current system of employer-based insurance, nor do we see an explanation for such a scenario in the report.  The goal of reform must be a unified and universal system of publicly financed healthcare to which all employers contribute financially, rather than by acting as insurers themselves. Similarly, we do not see the option of selling GMC as Medicare Advantage Plan as compatible with Act 48 and its intent of a unified public healthcare system. Vermont statute requires healthcare to be treated as a public good, which means it is entirely inappropriate for consultants to suggest amending Act 48 to sell GMC as a commercial product and burden older people with the costs of privatized healthcare. 

• Finally, with regard to the principle of universality, we welcome the report by the GMC Board which explains the importance of including all residents, regardless of their immigration status, in our universal system. We trust that this committee will affirm this conclusion and ensure its implementation. 


• As I stated earlier, we assumed that the purpose of this report was to propose an equitable financing plan for GMC. We are disappointed that the report does not do this, yet we wholeheartedly agree with the report’s recognition of our “historic opportunity to create a financing system that is more progressive than the current system.” We now call on you, our legislators, to take this opportunity and set out the parameters for the equitable financing of GMC.

• Act 48 requires that the public financing plan for GMC must meet the principle of equity.  Contributions to the system must be based on the ability to pay, rather than on the use of needed care. The administration’s report recognizes that public financing should be able “to address inequities in the current financing of health care.” This is clearly a minimum proposition; we understand Act 48 to require financing to be fully equitable, rather than merely less inequitable. We welcome that the report sees an opportunity to combine an equitable financing proposal with an effort to increase equity in our tax code as a whole. We have proposed, in line with our People’s Budget Campaign, that the state embarks on a reform of our tax system based on the principle of equity. 

• We are also glad that the report clearly recognizes that the private, market based “system of financing health care is regressive, as it requires low-income individuals to pay a higher share of their income than higher-income individuals, and leaves a number of individuals uninsured and under-insured.”  To summarize, the report estimates that as a percentage of their income, low-income families pay premium costs that are three times higher than those of middle-income families, and out-pocket costs that are four times higher. We appreciate that the report, taking its cue from Act 48, engages “in an effort to develop a model that provides better value for Vermont: provides comprehensive benefits to everyone at a lower cost and with a more progressive financing system.” The report recognizes that this means that  “individual premiums will be eliminated.” Premiums are one of the relics of the old insurance model and link access to care to user fees and benefits packages. Rather than paying premiums for insurance products, in our new system we should pay progressive taxes to share the cost of providing all needed care as a public good.

• As you review the report’s evidence of the highly regressive nature of insurance premiums and user fees, paid by individuals and families, we ask that you set the parameters for implementing equitable financing through progressive taxation and eliminating insurance premiums, deductibles, co-pays and co-insurance.  The administration’s report, while listing the current range of the state’s revenue sources and tax expenditures, fails to propose an approach for applying the equity principle to an assessment of funding sources. We see this now as a task for legislators. The HCHR campaign has developed implementation standards for equitable financing and, guided by these standards, designed a proposal for equitable financing, and we look forward to discussing this with you. 

Participation, transparency and accountability

• We are concerned that the report commissioned by the administration does not fully understand the principles in Act 48. The people of Vermont must be able to hold all stakeholders and key players in the reform process accountable to the principles in the Act. Yet the report introduces an entirely new principle, if I can call it such, named competitiveness. This does not exist in Act 48, nor it is clear what meaning the report allocates to it. We are confident that as legislators you will do a better job in sticking to the principles included in the law you wrote.  

• We appreciate that the report recognizes the importance of an open and transparent dialogue with the people of Vermont about financing healthcare and other public goods. We trust that the legislature is best placed to set out the principles and parameters to make such a dialogue meaningful.