McClaughry: Health care debate

On Aug. 12, VTDigger's health care reporter Kristin Fountain opened her story with the lead, "Nearly all of Vermont's hospitals are seeking double-digit percentage increases in income from patient services for 2024 over 2022, setting the stage for a likely battle with health care regulators."

At about the same time, the Green Mountain Care Board, the state's regulatory agency, issued a decision reducing Blue Cross Blue Shield of Vermont's individual premium rate increase request from 18% to 14% and its small group plan request from 17.5% to 13.3%.

These requests for increases are quite significant, well above the effects of overall price inflation, and without any significant increase in patient populations.

How a government regulatory board sets allowable prices is a mysterious process. I daresay 95% of our legislators have very little idea how the GMCB goes about its business. To arrive at a government-allowed increase for insurance rates, for example, the GMCB is required to "determine whether (the rates) are affordable; promote quality care; promote access to health care; protect insurer solvency; are not unjust, unfair, inequitable, misleading, or contrary to the laws of this state; and are not excessive, inadequate or unfairly discriminatory." This charge does not admit to an objective determination.

Not surprisingly, the hospitals and insurance companies petitioning the board present a long list of explanations about why extraneous circumstances absolutely require their requested rate increases. They hope they'll still be able to charge enough to get by when the board, created in the name of "cost containment," changes 18% to 14%.

Hamilton Davis, a longtime advocate of "health care reform," has written, "It was always true that the more important aspect of reform has been cost containment in the delivery system. Failure to rein in (Vermont's Medicaid) inflation rate would destroy any reform effort, single payer or anything else. The bedrock question, therefore, is how to contain costs, and not just damp them down for a year or two or three, but set them on a permanent track at a level no higher than the ability of society to pay the bill."

Let's take a quick trip through 30 years of "health care reform." In 1994, Gov. Howard Dean, aspiring to be America's young doctor-governor, offered a German-inspired "regulated multiplayer" health insurance plan. Single-payer advocates again pressed to put the government in control of all financing. Both proposals crashed and burned. In 1995, Dean recognized that a system reform was out of the question, and said he would work to expand Medicaid to ever higher income families. He did, and costs soared.

In 2011, new Democratic Gov. Peter Shumlin purchased the Hsaio Report as the infallible road map to single payer. However, the Legislature wouldn't buy all the provisions Dr. Hsaio insisted were essential. When the revised proposal was costed out — three years later — Shumlin sadly pulled the plug.

But the idea of government-controlled health care financing lives on. In 2016, Shumlin bought into the "all payer" model, built around a monopoly Accountable Care Organization, now known as OneCare Vermont. But it didn't reach full monopoly status, and soon became the obvious captive of the aggressively expansive UVM Health Network. Its operating principle is coerced cooperation leading to "integration," aka consolidation.

At the center of this narrative is the determination of "health care reformers" of all stripes to increase government control of health care resources, in an effort to meet all the requirements laid upon it by legislators. Within that regulatory system, all the actors — providers, insurers, politicians and government bureaucrats — will press every argument available to protect their current and future interests.

There is a wholly different and viable model for quality health care and cost containment, based on market competition and consumer choice. But promoting it in Vermont would disruptively alter the investments in, and prospects for, what we have today, to the disadvantage of all of today's stakeholders. The best known model is Singapore's, and its components are Medisave, Medishield and Medifund.

Dr. Phua Kai Hong, of the National University of Singapore, listed as crucial components "the creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost sharing; the regulation of hospital beds, doctors and the use of high-cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public and private-sector providers."

This is drastically different from 40 years of Vermont's muddled command and control efforts. Singapore's is not a wholly free-market solution, but it has worked for over 60 years. Granted, there are many important differences between Singapore and Vermont, but it's long overdue for Vermont to look beyond the many "stakeholders" jealously guarding their interests, and start looking at tested — and affordable — real-world alternatives.

John McClaughry has authored health care reports for the Ethan Allen Institute.