Healthcare costs in Vermont grew by a modest 1.5 percent in 2011 -- a positive sign, say members of the Green Mountain Care Board, but not cause for celebration, especially considering other recent findings of hospital cost-shifting from public-payers to commercial health plans.
That 1.5 percent growth rate is a welcome decline from the average annual growth rate of 4.7 percent seen between 2006 and 2010, according a report by the Green Mountain Care Board (GMCB), which regulates hospital budgets and insurance rates and will be responsible for approving the governor's single payer plan in the coming years.
"This is good news," Anya Rader Wallack, chair of the GMCB, said in a media release, because in 2011, Vermont's cost trend actually dipped below the national growth rate of 3.9 percent.
Still, Rader Wallack said: "Our best projections show that, without further intervention, we will be at or above the national rate of growth for 2012-2014. It is imperative that we continue to use regulatory pressure and innovation in Vermont's health care system to avert this outcome. We do not know yet if Vermont's low growth will be sustained."
Already Vermont has above-average healthcare costs, with health spending accounting for 19.3 percent of state GDP in 2011, compared to 16.9 percent nationally.
The GMCB looked at health spending in hospital and physician services, home health, nursing home care, prescription and over-the-counter drugs, dental and vision services, as well as administrative costs in insurance claims processing and government programs for mental health, substance abuse and disability compensation.
The 1.5 percent spending increase was seen mostly at hospitals and half of that was at Fletcher Allen Health Care, according to the report, with spending by other providers like independent physicians growing at a slower rate.
To a large extent, Rader Wallack noted, 2011's modest spending growth may be anomalous and likely a reflection of reduced demand in a weak economy.
And that 1.5 percent (or $74 million) increase between 2010 and 2011 came as insurers in the state reduced their administrative costs and surpluses by $54 million -- and as hospitals were shifting some costs associated with limited government reimbursement onto commercial payers, the GMCB found.
According to the GMCB, private payers in Vermont absorbed about $220 million in costs not covered by Medicare and Medicaid in fiscal year 2012, along with $67 million in free care and bad debt, spending written off because a patient couldn't pay.
In 2011, based on extrapolations from earlier data, the GMCB estimated that hospital cost-shifting accounted for 17 percent of Vermont commercial insurance premiums.
Cost shifting "undermines efforts to constrain overall health care cost growth," said Rader Wallack, a Vermont native who's worked in healthcare since the 1990s with then-Governor Howard Dean and then-First Lady Hillary Clinton, among others. "It is important that government pay its fair share of costs, and that we hold growth in costs to a rate we all can afford."
One solution being considered by Governor Peter Shumlin and approved by the House, would include regular inflationary updates in annual Medicaid budgeting. Other ideas the GMCB is floating include tracking increases in cost-shifting through the hospital budget process and using rate-setting authority to make pricing in the market more transparent.