NCPA - National Center for Policy Analysis


January 12, 2005

Legislators in Vermont radically changed the state's health care system through a series of policy changes between 1984 and 2002. Now the state's health care system is a mess, according to the Ethan Allen Institute.

The Vermont legislatures approved many mandates designed to expand the state's control over the health care market, including forcing community rating on health insurers (in 1991) and expanding Medicaid coverage with below-market reimbursement rates for health care providers (approved by Gov. Howard Dean in 1994).

As a result:

  • The number of private insurance companies in the state has decreased from 16 to three.
  • Community rating systems have forced young and healthy policyholders to subsidize older, wealthier policyholders and those with unhealthy lifestyles, causing many healthy individuals to drop their coverage or shift it elsewhere.
  • Both Medicare and the expanded Medicaid programs have shifted cost burdens to hospitals, creating budget shortfalls; in 1998, cost shift shortfalls from both programs totaled $34.5 billion at Vermont's hospitals.
  • In 1992, 9.2 percent of Vermonters were uninsured; by 2002, however, the percentage grew to 10.3, despite massive government efforts to provide universal coverage.

The institute's report recommends several fundamental reforms to Vermont's health care system, including:

  • Creating health savings accounts that allow families to pay health care deductibles and routine expenses with tax-free money.
  • Reviving the competitive insurance market through, among other policies, repealing the mandated community rating system for health insurance providers.
  • Discouraging free or low-dollar deductible coverage that creates incentives for patients to overuse health care services.

Source: Report, "Health Care in Vermont: A New Prescription," Ethan Allen Institute, July 2004.

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