Gobeille Skeptical Of Shumlin's Guarantee To Reduce Premiums

Feb 23, 2015

A central part of Gov. Peter Shumlin's plan to boost Medicaid reimbursement rates is his guarantee that the plan will reduce private health insurance premiums by 5 percent. But a top state health care official says that guarantee is anything but certain.

Under Shumlin's plan, a 0.7 percent payroll tax would be imposed on all businesses. The tax would raise roughly $90 million each year, and this new revenue would be matched with $100 million of federal funds.

The goal is to use $140 million to boost Medicaid reimbursement rates in order to significantly reduce the Medicaid cost shift. This happens when Medicaid reimburses health care providers at roughly 50 percent of the cost of their service and the remaining costs are then shifted over to private insurance premiums.

Shumlin is trying to sell this plan to the state's business community by arguing that the proposal is basically cost neutral. Yes, he says the businesses will pay the new payroll tax, but reducing the Medicaid cost shift will lower their health care premiums.

"Let's insist that any method that we come up with to pull down the federal dollars to fund this in a tax to Vermonters gets returned to the people who pay it,” Shumlin says.

"Let's insist that any method that we come up with to pull down the federal dollars to fund this in a tax to Vermonters gets returned to the people who pay it." - Gov. Peter Shumlin

The governor says his plan will reduce health care premiums by 5 percent, and he's willing to guarantee this savings.

"We are so sure that we can get this money back to the businesses and individuals who pay it with a 5 percent premium decrease over what they otherwise would have paid that we're willing to put in the law the Green Mountain Health Care Board will audit this annually," the governor says. "And if we don't get the money back to the people who pay it, it sunsets.”

The governor, lawmakers and businesses are asking Green Mountain Care Board Chairman Al Gobeille to guarantee that 5 percent reduction in private premiums. But Gobeille says that can't be done.

They're turning to me and saying, ‘Can the board guarantee this?’ And again I will say no, that if that's the only reason they would do this, then they shouldn't do it. You cannot, in such a complicated part of our economy, guarantee something like that,” Gobeille says.

"You cannot, in such a complicated part of our economy, guarantee something like that." - Green Mountain Care Board Chairman Al Gobeille

But Gobeille says it is critical that lawmakers address this issue this year.

I can guarantee something,” he says. “That is if we do nothing, the invisible tax that is put on the business community from the Medicaid shift will increase in the rates in 2016." 

Many members of the House Ways and Means committee have concerns about using the payroll tax, and some may try to develop various options in the coming weeks.