Hospital budget commission says state needs to reform health care regulation

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(Host) The commission that reviews Vermont hospital budgets wants the state to take aggressive action to control health care costs.

The state recently allowed hospitals to raise rates by an average of nine-and-a-half percent.

But the Public Oversight Commission says that’s unsustainable. It’s calling for fundamental change in how the state regulates health care.

VPR’s John Dillon reports:

(Host) The Public Oversight Commission reviews hospital budgets every year. But it’s only an advisory exercise. The panel doesn’t have the authority to set rates or order hospitals to cut costs.

And it’s clear the members have hit a new level of frustration with health care and hospital costs that continue to climb at twice the rate of inflation year after year.

Frank Mazur is a commission member from South Burlington.

(Mazur) “It’s a system which is a sick system. What we want to do, what the board would like to do, is to make people aware of what this is and let’s start the debate because every solution that comes up doesn’t address the problem.”

(Dillon) The commission has sent a strongly worded letter calling for a radically different way to regulate health care. The panel says all hospitals should get the same rate increase – inflation plus 2 percent.

(Mazur) “We think that… with 9 percent increases, 7 percent increases continuously, which is way above the inflation rate, what we have here is just totally unsustainable. And to rely on rate increases and increased utilization to balance hospital budgets is just not realistic.”

(Dillon) The commission also wants government to fully fund its own health care programs. Right now, Medicaid and Medicare reimbursements don’t cover the full cost of care, and those costs are shifted onto those who have health insurance.

The commission’s letter puts the problem bluntly.  It says – quote –  the "cost shift is killing Vermont competitiveness and deflating the real value of Vermonters’ wages through excessively high, and escalating, commercial insurance premiums.”

Vermont hospitals agree that the cost shift is a hidden tax that reverberates through the economy.

But Bea Grause, the president of the Vermont Association of Hospitals and Health Systems, says if hospitals are forced to reduce rates, they will also have to cut health care services.

(Grause) “The bottom line is that in order to create a sustainable health care system we have to produce enough revenue to pay for the care that we all get. And if that’s not possible, we have to decide what we’re willing to do without. And that’s where the cost shift comes in, because currently, nationwide, one out of every four dollars that is spent on health insurance goes to the cost shift.” 

(Dillon) The Douglas Administration is also not eager to endorse the commission’s prescription to reform health care regulation. Paulette Thabault is commissioner of Banking, Insurance, Securities and Health Care Administration. She says the 9 percent average rate increases given to hospitals were justified.

(Thabualt) “I don’t have any plans to go to the Legislature to change the process. I think that overall the hospital budgets that were presented to us were very responsible budgets. My goal is to have healthy institutions in the state of Vermont.”

(Dillon) The oversight commission may get a more receptive hearing at the Statehouse. Chittenden Senator Doug Racine – who chairs the Senate Health Care Committee – says he understands the panel’s frustration and wants to hear their suggestions when lawmakers return in January.

For VPR News, I’m John Dillon in Montpelier.


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