March 30, 2009

March 30, 2009 | Commentary on Health Care, Medicaid/SCHIP

Learning from Vermont on Health Care

Several years ago Mitt Romney, a Republican governor, joined with a very liberal Massachusetts legislature to transform that state's health care system. They took advantage of a Bush administration-approved waiver and fundamentally changed the state Medicaid program.

President Barack Obama will soon visit another New England state - Vermont - as he takes his "Forum on Health Care Reform" on the road. But he might learn more by listening than by lecturing. Vermont, under the leadership of Gov. Jim Douglas (another Republican), also operates its Medicaid program under a waiver and has produced one of the most far-reaching changes in any state.

What Obama can learn is that in Vermont, Medicaid is not really a traditional Medicaid program anymore. Under a 2005 waiver, Vermont can change benefits and use cost sharing in ways not allowed under traditional Medicaid. Vermont officials said they could do a much better job for their poorest citizens if the state was freed from Medicaid's rigid rules and regulations. So, they agreed to exchange some financial risk for greater flexibility in managing the program.

Vermont families are invited to apply for Catamount Health or learn about the Vermont Health Access Plan, or apply for premium assistance to help them participate in private employer-sponsored health insurance.

Children are eligible for "Dr. Dynasaur." Traditional Medicaid is barely visible to the public.

The state also got permission from Washington to redesign its long-term care program for the elderly and people with disabilities. In contrast to traditional Medicaid -- where a person is entitled to a nursing home bed but not to services in their home or community -- Vermont created "Choices For Care," which offers alternatives, including home care. As a result, it's serving more people, yet has lowered costs. Surveys show satisfaction rates in the high 90 percent range.

Patrick Flood, the Deputy Secretary of the Vermont Agency of Human Services, says that when people have equal access to nursing home or alternative care, people choose home-based care - which is actually cheaper.

Vermont also allows consumer-directed options for care. Flood reports: "Consumer-directed care, on average, is invariably cheaper than other models and thus - again - contributes to serving more people for the same money." Even those who have long championed the old-fashioned entitlement approach, Flood notes, have come to accept this change because it's clear Vermont is serving more people and that the home-based alternative to traditional nursing care is what most people really want.

Because long-term care accounts for more than $100 billion in spending annually - about one-third of all Medicaid spending nationally -- fresh ideas on long-term care are sorely needed.

For President Obama, there are big lessons here.

First, don't shut down state innovation with some "one-size-fits-all" national health care program. Vermont demonstrates that a decentralized, consumer-driven system can expand access and improve quality within current resources.

Second, traditional Medicaid shouldn't be the vehicle for expansion of health care. More people can be served with the same amount of money, provided we look for alternatives.

Third, listen to what real people want, instead of being swayed by special-interest lobbyists -- who, unfortunately, were the first to be invited to a White House forum on health reform. Every interest group that attended thinks they will be getting more money out of the taxpayers.

If the hospitals, doctors, health plans and drug companies are all going to get more money - with another spending increase expected to reach another $1 trillion - where does President Obama expect his promised health care savings of $2,500 per family to come from?

Massachusetts is facing budgetary problems mostly because the politicians insisted on preserving big hospital payments by protecting certain well-connected special interests rather than relying on competition. Obama should avoid this aspect of the Massachusetts experience.

Medicaid is a welfare program and - on paper - has a richer benefit package than Medicare or even most private plans. Although states can obtain the authority to reform Medicaid in a serious way, most don't, largely because the current open-ended matching system of financing encourages providers and special-interest groups to pressure states to get more federal dollars.

Inevitably, states cannot afford their share of Medicaid, which forces states into price controls and rationing by limiting access to care.

When Rep. Mike Burgess, R-Texas, a doctor, asked a panel of witnesses at a congressional hearing if they would be willing to exchange their private health plans for Medicaid, not one accepted. Taxpayers likewise ought to ask politicians a simple question: Why are they so desperate to expand Medicaid, or displace private coverage with a government-run program, when they themselves want no part of it?

Officials in Vermont, a liberal state if there ever was one, have made major reforms in Medicaid. There's no reason other states shouldn't be allowed do the same thing.

Dennis Smith, former director of the federal Center for Medicaid and State Operations, is a senior fellow in health care reform at The Heritage Foundation's Center for Health Policy Studies.

About the Author

Dennis G. Smith Visiting Fellow
Center for Health Policy Studies

Firt Appeared in McClatchy