Commentary

McClaughry: health care costs rise with government ‘reform’

John McClaughry

            Paul Jarris MD, one of the best Commissioners of Public Health (2003-2006) that Vermont has ever had, often said forthrightly that “about forty percent of what Vermont spends on health care is simply wasted.”

John McClaughry

            Since then Vermont has gone through Catamount Health, Green Mountain Care, and All Payer. Have we gained much ground toward achieving our goals for a healthy and affordable Vermont ?

            OneCare is the Accountable Care Organization created when Gov. Shumlin’s single payer plan fizzled out in 2014, and was succeeded by All Payer. OneCare controls the flow of health care money from commercial insurers, Medicare and Medicaid. Its purpose is to force the providers to meet the health care needs of a defined group of patients at a contracted price, rather than add up “fee for service” billings that are a major factor in health care cost inflation.

The Green Mountain Care Board is charged with restraining the growth of health care spending, which it attempts to do by haggling over allowed percentage increases of provider spending. This year the hospitals have asked that the GMCB budget approval process be scrapped altogether, due to COVID disruptions. 

Former Lt. Governor David Zuckerman, speaking from the Progressive Left last October, accused OneCare of gobbling up $20 million in bureaucratic costs without delivering patient benefits. The single payer Left never approved of a non-governmental body (OneCare) controlling hospitals and spending, and it’s eager to resurrect its dream of a full blown government takeover.

Next year the All Payer system is not likely to meet the five-year Federal performance targets, notably a 3.5% per capita growth cap in costs with 70% of all Vermonters under OneCare’s control. Richard Slusky, who directed “payment reform” at the GMCB for six years, bemoans the lack of progress the state is making in getting All Payer to work.

In a major report last January, State Auditor Doug Hoffer found that “if [our] health care spending had increased at the same rate as the U.S. average, we would have spent roughly $1 billion less in 2018.”  Per capita health expenditures were $9,076, 26% above the U.S. average. His report described this as “economically unsustainable”.

Meanwhile, medical provider concentration proceeds apace. Eighty two percent of physicians and surgeons are now (2018) employed by hospitals, that can add “facility fees” to billings for their services to produce more income.

Auditor Hoffer was alarmed that  “dominant firms – those that have significantly more market share than their next largest rival – can exploit their market power to charge higher prices, earn more revenue, and capture economic surplus that would pass on to consumers in a more competitive marketplace.”

It’s perfectly clear that he is looking at the UVM Health Network, which is not only by far the biggest health care provider, but also effectively controls OneCare to protect itself against any efficiency initiatives that might threaten its patient revenue stream.

Last October Katie Jickling, Vermont Digger’s healthcare reporter, cited four avenues of “reform” under discussion. One is to institute universal “free” primary care – often proposed, but always found unaffordable. The second is to authorize GMCB to set hospital “global budgets”, leaving each hospital free to use the allowed revenues to provide care to the aligned patients.

The third is to merge the UVM Health Network with Blue Cross Blue Shield of Vermont, creating an integrated provider/insurer with no serious competition. The fourth is to patch up All Payer by somehow promoting more collaboration among the providers in deciding who does what and who get how much money.

Here’s the key insight: every proposal since 2011, and every “reform” being debated by the “stakeholders” today, agrees that state government should increasingly regulate, mandate, cap, require and control the health care of 623,000 Vermonters. The end result of all of these “reform” plans will undoubtedly be that Holy Grail of completely government-run health care, where competition is illegal, the (unionized) bureaucracy proliferates, and everyone gets “appropriate care at the appropriate time in the appropriate setting” (per Vermont’s Act 48 of 2011).

What is pitiful about this ongoing policy debate is that it willfully ignores a demonstrably provably superior path of personal responsibility, informed patient choice, provider competition, price transparency, less third party payment , diminished regulation, liability restraint and outcome accountability.

You’ve never heard of any of that?  It’s because few if any of the “stakeholders” in today’s health care policy arena, including legislators, have any interest in learning from the vast literature on the subject, and developing such a radically different model. Instead, they’re concerned about protecting their power, livelihoods, and piece of the $5.6 billion health care money pie, at the expense of their patients and their employers.

The author is founder and Vice-President of the Ethan Allen Institute.

Categories: Commentary

7 replies »

  1. Again we’ve “created” a bureaucratic monolith to provide service to citizens and it’s self interest has obstructed it’s actual service. When it is a private corporation we at least have the semblance of individual response tools…we decide to buy their products…or not; and we can sound off at shareholder meetings. When the monolith is a government artifact the voter approval mechanism available to us is low impact at best. Witness the health care system described by Mr. McClaughry…witness the public school system. Wouldn’t it be prudent to resurrect the vision that small is good: clear off the bureaucratic obstructions…let consumers/clients/citizens be directly (personally) connected to the provider without the intervention/interference of these big organizations. Patient personally doing business with Physicians and their organizations…parents doing business with teachers and their organization.

  2. I’m shocked that more regulations and more bureaucracy didn’t decrease the cost of healthcare. Every time I hear the Green mountain board is allowing these hospitals to increase rates that continue to cover the cost of another failed bureaucracy system is just unbelievable to me. Whole damn thing’s got to get scrapped what we had before was way better than this. Allowing all the hospitals to compete against each other and not giving UVM a monopoly and opening up insurance beyond cigna, BSBC and MVP may help too. As long as the state wants to subsidize UVM Medical Center thus allowing them to continue to put smaller hospitals out of this business by not allowing hospital to decide what procedures they can do ( example Copley Hospital was doing too many procedures, how dare Copley CEO wanted to try to make their Hospital profitable) and Blue Cross and Blue Shield Monopoly control as well; were never going to get anywhere.

  3. John.
    Another fine article that begs for letting free enterprise control our medical industry instead of bloated government. They have some programs here in Florida that seem to work more efficiently. They try to keep a lid on runaway medicaid giveaways.

      • Capitalism or Free Enterprise, call it what you will. Its the lack of competitive choices that drives prices higher in any market, be it healthcare, education or anything else.

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