A Proposal for Vermont Healthcare: VermontHealth

For generations the delivery of medical care has been a highly disputed and controversial issue in the United States.  In general, the left side of the political spectrum continuously attempts to develop government run health programs on the state and federal levels, while the political right often resists these attempts.  There are many variables to consider about this trend, including political fervor and expediency, profit motives, special interests, and human inertia.  Though it is impossible to define unified positions for the Left and Right, the conclusion can be drawn that the size, complexity and often the cost of healthcare systems have all increased.  Over the years we have seen the development of national programs such as Medicare and Medicaid, while individual states have also implemented varying government assistance programs for those in financial need.  Currently, we are witnessing one of the biggest pushes for health reform in our country’s history, with the goal to make healthcare available to all people.  While many of these programs have successfully delivered healthcare to their target populations, the fact remains that insurance companies are still heavily involved and make a profit at the expense of the tax-payer.  Cigna, Aetna, Blue Cross etc. all contract with state governments and the federal government to create plans for eligible citizens to choose from, which creates a profit that can be distributed among shareholders in the company.  This is the inefficiency that VermontHealth seeks to address, using the cooperative model of business to provide the citizens of Vermont with a local, not-for-profit healthcare option with the sole purpose of benefitting its members.  The mission is not to eliminate insurance companies completely or discourage the use of government resources; rather, it is to streamline the most effective components of those two to supplement the co-op, while keeping both the capital and control of the business within the state and in the hands of community stakeholders.

What is a co-op?

As defined by the International Co-operative Alliance, “A co-operative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.”  The model can be applied to a variety of businesses to encourage community involvement, keep capital local and give members a feeling of ownership of and responsibility for the business.  Every member has a vote towards the election of an unpaid board of directors, which meets periodically throughout the year to decide how profits are to be redistributed throughout the co-op.  Credit Unions are an example of this cooperative model that most people are familiar with; even though they are usually smaller than banks, they attract enough capital from the community to provide loans, earn back interest on these loans, cover expenses, and return the remainder of the profits to the members in the form of higher interest rates for depositors and charging lower interest rates on loans.  There is presently one successful medical cooperative in the United States, called GroupHealth.  It implemented this model when it opened in 1947 and currently serves over half a million citizens of Washington State and Idaho.

Why Vermont?

A pervasive philosophy in our country is that “Bigger is always Better,” when delivering products to consumers.  Our food system is primarily based on the existence of massive grocery stores, chain retail outlets bring us our clothing, we are constantly looking for new sources of oil to feed our affection for the automobile, and we can’t forget the banks that are “too big to fail.”  Because this mentality contradicts the ethos of the cooperative business model, it would be necessary to situate a new health care co-op in a market where the consumers share its values.  I believe that the people of Vermont can be this market because:

1.  Citizens of Vermont are already well acquainted with the cooperative model of business.  Credit Unions with members who take their board of directors elections seriously are abundant, so there is already a critical mass of responsible citizens with experience in deciding how co-op profits should be used.  Over the years these banking co-ops have been able to reduce entrance restrictions to broaden the base of membership and now provide excellent free-market competition to the banks.  Many citizens of the Green Mountain State also rely on one of the 16 food cooperatives for their grocery needs.  For example, City Market in Burlington, the state’s largest city with 40,000 residents, has over 4,000 members and welcomes over 3,000 customers each day.  The 1,000 Vermont vendors with whom the co-op does business make up 73% of the food selection and 60% of each dollar earned stays in the state.  Membership also provides discounts at many other local businesses and the option of volunteering a few hours a month to earn up to a 12% discount on all the groceries you buy at the market.

2.  Formerly the most conservative state in New England, Vermont has experienced a large immigration of progressively-minded people over the last two generations, which has substantially impacted the political landscape.  With the issue of a public health option as a large motivating factor, the population voted overwhelmingly for Barack Obama in the 2008 election, in addition to re-electing Congressman Peter Welch (D).  Senator Patrick Leahy (D) supports a public healthcare option and will be running for his 7^th term in 2010, serving along with Senator Bernier Sanders (I) who champions a single payer system.  Within the state offices the Democrats have a super majority in the House and Senate, leaving breathing room only for Governor Jim Douglas, a moderate Republican.  Perhaps the most interesting component of Vermont politics is the existence of the Progressive Party.  Exclusive to Vermont, it has more members in elected offices than any other third party in the country, including the Mayor of Burlington, 5 State Reps, 1 State Senator and many city councilmen/women throughout the state.  The first part of their Party Platform states very clearly their support for a single payer system.

What would the plans look like?

Before going into further detail about VermontHealth itself, a clarification must be made about what Vermonters want to see in their healthcare system.  I just provided substantial evidence that the majority favor public solutions to assist those who cannot afford insurance, and soon I will detail the state programs that have already been implemented; however, while well intentioned, those programs do not address the substantial inefficiency inherent to sending dollars out of state through insurance companies for medical coverage.  The mentality has focused too heavily on the question, “how can we insure the most people,” when the focus should be on the question, “how do we create a sustainable health system.”  Because this perspective shift has yet to happen, people have not had the opportunity to consider the possibility of a co-op delivering healthcare instead of insurance companies.  The mission of VermontHealth is to keep money in the state so costs come down and make healthcare more affordable overall.  Citizens will still be satisfied to know that the state government has a hand in delivering care to those in need, but will be happier to know that more of the tax dollars spent on that care are kept local.

VermontHealth will offer a variety of coverage plans for people to choose from to suit their needs.  Traditional insurance companies will have a small role in these plans through providing catastrophic coverage.  Because the co-op will only enroll citizens in the state of Vermont, the amount of available capital is limited and would not allow for coverage of extremely costly medical care.  For this reason a percentage of a member’s premium will be paid to a larger for-profit insurance company that can handle these expenses should they arise.  As the co-op grows, the amount of coverage it can provide members before insurance must take over will also grow, which will bring down the cost because the money from premiums will increasingly be in the hands of the co-op and not a company out of state.

With this relationship in mind, medical plans with the co-op will range from very basic catastrophic coverage plans, to comprehensive plans that attend to all of a patient’s needs.  Regarding the first end of the spectrum, there are many younger citizens who do not want to pay a large amount for healthcare each year, but still want protection in the event of a serious and costly injury or illness.  This is reasonable since younger people often use only a small percentage of the healthcare they pay for, and would rather risk a $3,000 deductible than spend years paying thousands of dollars for the primary care and specialist coverage they don’t use.  The one caveat of this type of plan with VermontHealth is that they are required to see a primary care physician for a physical once each year.  Preventative care will be a high priority for the co-op and payment for this visit will be factored into the plan; anything beyond this visit that a patient feels is necessary will be paid for out of pocket.

For those who want a much lower deductible and only want to encounter co-payments when seeing a primary care doctor or specialist, there will be plans with higher monthly premiums.  The distinguishing factors between these plans and what a person may already have with an insurance company will come from improved customer satisfaction and decreased costs.  One of the benefits of the co-op model is that members feel a sense of solidarity and ownership, knowing that they can have a say in how business is conducted.  The community nature of the co-op will encourage health-related discussions amongst friends, all the while costs are reduced because profits from paying for these primary and specialized care services are used to serve the members, not shareholders.

Access to prescription drugs is an area of healthcare where costs can be highly variable.  For some members of the co-op it will only be necessary to have a negotiated plan with local pharmacies to suit their needs, while other members will require much more.  For these patients it will be necessary to have a Pharmacy Benefit Manager associated with their package to assist in lowering prescription drug costs as much as possible.

Earlier it was mentioned that preventative care will be a high priority for VermontHealth, as it is for the state of Vermont as a whole; in fact, earlier in 2009 the US Center for Disease Control ranked Burlington as the Healthiest City in the United States in terms of high exercise and low indicators of illness.  In addition to a required annual physical examination, which members will be reminded of through a phone call from their friendly local co-op representative, preventative healthcare will also be supported through partnerships with local businesses and through education.  Members will enjoy discounts at local gyms, yoga studios, karate classes, healthfood stores, athletic equipment stores, and essentially any other local business that promotes good health and wants to advertise through the co-op with their discount.  To increase members’ education about their personal health, VermontHealth will partner with the 3 Area Health Education Centers (AHEC) and the Vermont Blueprint for Health, a program run by the state’s department of health.  The AHECs are non-profit organizations that receive money from the state, the Federal government, the University of Vermont College of Medicine and local hospitals.  Two of their main functions is to address the needs and concerns of patients in rural areas, and to serve as a bridge between the communities and health education providers and caregivers.  The purpose of the Vermont Blueprint for Health is to teach patients with chronic conditions how to manage their own care from home to the greatest degree, thus avoiding costly trips to the hospital.  These are two organizations that VermontHealth will make its members actively aware of through literature distribution and workshops held regularly.

Government assisted payment

While VermontHealth plans will be more affordable than typical insurance plans to businesses and individuals, undoubtedly there will be many citizens who cannot afford a plan and do not have benefits through an employer.  For these people there are a number of programs in existence that they can qualify for to pay for medical insurance, however, it will be in the best interest of Vermont to use these funds paying the co-op for coverage rather than an insurance company, because profits stay in the state.

Programs that are funded by the state government and work in collaboration with insurance companies include Catamount Healthcare and medical benefits paid to state employees; additionally, many older citizens rely on Medicare which is funded by the federal government.  If a citizen meets certain income limitations and has been without health insurance for at least 12 months, he or she can qualify for Catamount, which is an insurance plan created by the state, Blue Cross Blue Shield of Vermont and MVP Healthcare of New York.  If a citizen is a teacher in Vermont then they can choose from plans offered by Blue Cross Blue Shield, and if a citizen is a state employee then they can choose from four plans offered by Cigna.  In each of these cases, the tax payers of Vermont are footing the vast majority of the bill for these plans, watching those hard earned Vermont dollars leave the state.  It will be in the best interest of the state government to offer VermontHealth as an alternative, local and more affordable option to its employees and dependents.  With the support of the state government and the prices of plans continually being lowered, VermontHealth will also be an attractive option for the federal government to offer seniors under Medicare.

For those who are not old enough for Medicare and have severely limited financial means, there are fee-for-service programs that they can qualify for through the state.  Medicaid is a national program, but is individually managed by the states, with funding coming from a combination of state and federal dollars; Vermont uses a great deal of this money to fund Dr. Dynasaur for kids under 18 and the Vermont Health Access Plan for adults.  While these citizens would not be enrolled in a VermontHealth plan, it would be our goal to have them use VermontHealth facilities, in addition to continually making future enrollment in a plan a likelier possibility through lower costs.

Many citizens in Vermont are also eligible for prescription drug plans, including VScript, VPharm, VScript Extended and Medicare Part D.  VermontHealth packages will be tailored to incorporate the use of these programs for those who qualify.

Doctors, Facilities and Start-up Funds

Vermonters receive their healthcare in a variety of facilities throughout the state, including hospitals, rural health clinics, private practices and federally qualified community health centers.  VermontHealth will broaden its network to include physicians in all of these settings through competitive reimbursement for services and the guarantee of a steady stream of cliental.  Members should not feel restricted though, and one of the first priorities when considering the distribution of profits to members, will be to ensure all out of network care is fully covered, both in and out of state.

While some members may choose to use medical facilities that are not owned by VermontHealth, the co-op will build facilities where it is economically feasible to compete with existing medical services.  A primary focus will be the development of larger medical facilities providing a wider variety of care in more rural locations.  Clinics that are funded with tax dollars and accept government funded insurance plans which send money out of state, should be replaced with a profitable co-op facility that re-invests in the community.  Doctors of different specialties will be attracted by competitive salaries and a steady stream of patients, which will dissuade them from going the private-practice route in these rural settings.

To construct the necessary infrastructure that VermontHealth needs for offices, labs and medical facilities, and to initially pay employees, we will seek capital through the state of Vermont in the form of grants from the Vermont Community Development Program (VCDP) and the sale of state and municipal bonds.   In 2007 the VCDP distributed 1.6 million dollars to seven communities for the development of various projects that would create jobs and contribute to the local economy, and under the guidelines of the VCDP VermontHealth qualifies to apply for this money.  More importantly, the Vermont Treasury issued 50.5 million dollars in government bonds for fiscal year 2008, backed by the full faith and credit of the Vermont tax-payer, for a variety of projects throughout the state.  These bonds are first made available for Vermonters to buy and are sold in denominations as small as $1000; VermontHealth will request that bonds be sold to fund development and will promise repayment with interest in a timely manner.  The state should be very receptive to this request, considering the number of jobs a health co-op will create and the money it will save the state from paying insurance companies.  Finally, municipal bonds are also available for small community governments to issue through the Vermont Municipal Bond Bank.  Those communities that are more motivated to have a VermontHealth facility developed will assume the risk of issuing these bonds and making the loan to the co-op.