Journal of the House

________________

WEDNESDAY, JANUARY 4, 2006

At one o'clock and fifteen minutes in the afternoon the Speaker called the House to order.

Devotional Exercises

Devotional exercises were conducted by Reverend Mitchell V. Hay of Trinity United Methodist Church, Montpelier, VT.

House Bills Introduced

House bills of the following titles were severally introduced.  Pending first reading of the bills, on motion of Rep. Sunderland of Rutland City , the rules were suspended and the bills were read the first time by number and referred as follows:

H. 564

By Rep. McFaun of Barre Town,

An act relating to the Vermont Hospital Security Plan;

To the committee on Health Care.

H. 565

By Reps. Milkey of Brattleboro and Pillsbury of Brattleboro,

An act relating to extension of quarterly income tax withholding deadlines;

To the committee on Ways and Means.

H. 566

By Rep. Milkey of Brattleboro,

An act relating to increase in property tax rebates;

To the committee on Ways and Means.

H. 567

By Rep. Keenan of St. Albans City,

An act relating to exemption from CON and HMO requirements for PACE;

To the committee on Health Care.

H. 568

By Reps. Keenan of St. Albans City and Young of Orwell,

An act relating to applicability of an act regarding trustees;

To the committee on Commerce.

H. 569

By Rep. Larson of Burlington,

An act authorizing the issuance of gift certificates for the purchase of hunting and fishing licenses;

To the committee on Fish, Wildlife and Water Resources.

H. 570

By Reps. Shand of Weathersfield, Martin of Springfield, Emmons of Springfield and Pellett of Chester,

An act relating to reclaiming and resurfacing Town Highway 7 in Weathersfield and Springfield;

To the committee on Transportation.

H. 571

By Rep. Otterman of Topsham,

An act relating to lowering workers’ compensation premiums;

To the committee on Commerce.

H. 572

     By Reps. Louras of Rutland City, Condon of Colchester, Houston of Ferrisburgh, Howard of Rutland City, Keenan of St. Albans City, Kitzmiller of Montpelier, Marcotte of Coventry and Morley of Barton,

     An act relating to placing a security freeze on a credit report;

     To the committee on  Commerce.

Joint Resolution Placed on Calendar

The Speaker placed before the House the following resolution which was read and in the Speaker’s discretion, placed on the Calendar for action tomorrow under Rule 52.

J.R.S. 44

     By Senator Welch,

     Joint resolution relating to Town Meeting adjournment.

Resolved by the Senate and House of Representatives:

     That when the two Houses adjourn on Friday, March 3, 2006, or Saturday, March 4, 2006, it be to meet again no later than Tuesday, March 14, 2006.

Rules Suspended; Bill Committed

H. 227

On motion of Rep. Brooks of Montpelier, the rules were suspended and House bill, entitled

An act relating to safe staffing and quality patient care;

Appearing on the Calendar for notice, was taken up for immediate consideration. 

     Pending the reading of the report of the committee on General, Housing and Military Affairs, Rep. Brooks of Montpelier moved that the bill be committed to the committee on Human Services, which was agreed to.

Bill Read Third Time and Passed

H. 548

House bill, entitled

An act relating to personal watercraft safety;

Was taken up and pending third reading of the bill, Rep. Donahue of Northfield moved to amend the bill as follows:

     By striking all after the enacting clause and by inserting in lieu thereof the following:

Sec. 1.  23 V.S.A. § 3312a is amended to read:

§ 3312a.  OPERATION OF PERSONAL WATERCRAFT

(a)  A person under the age of 16 12 shall not operate a personal watercraft.

(b)  All persons operating or riding on a personal watercraft shall wear a Type I, II, or III United States Coast Guard approved personal flotation device.

(c)  Personal watercraft shall not be operated at any time during the hours between one-half hour after sunset and one-half hour before sunrise.

(d)  Every person operating a personal watercraft equipped by the manufacturer with a lanyard type engine cut-off switch shall attach the lanyard to his or her wrist, clothing, or personal flotation device as appropriate for the specific craft.

(e)  A personal watercraft livery operating in the state shall:

(1)  Not lease, hire, or rent a personal watercraft to or for operation by any person under 18 years of age;

(2)  Administer boating safety instruction to an operator of a leased, hired, or rented personal watercraft not having a valid safe boating certificate and valid identification; and

(3)  Supply the following to an operator of a leased, hired, or rented personal watercraft in writing:

(A)  The operational characteristics of personal watercraft;

(B)  The requirements of this section and the boating regulations peculiar to the surface water in which the personal watercraft shall be operated; and

(C)  An explanation of the common courtesies of operating a personal watercraft and the effect of the operation on wildlife, the environment, and other water users.

(f)  In accordance with section 3316 of this title, the department of public safety may exempt public regattas, motorboat or other races, marine parades, tournaments, water skiing events, or other exhibitions from the requirements of this section.

(g)  The provisions of this section shall not exempt any person from compliance with applicable federal law or regulation, but nothing contained in this section shall be construed to require a person to meet the requirements of this section if the person holds a valid master’s, mate’s, or operator’s license issued by the U.S. Coast Guard.

Sec. 2. 23  V.S.A. §3305a is amended to read:

§ 3305a.  PRIVILEGE TO OPERATE A VESSEL; SUSPENSION OF PRIVILEGE; MINIMUM AGE FOR OPERATION OF MOTORBOAT

(a)  A person who meets the applicable requirements of this subchapter shall have the privilege to operate a vessel on the public waters of this state, as those waters are defined in 10 V.S.A. § 1422.

(b)  A person whose privilege to operate a vessel has been suspended shall not operate, attempt to operate or be in actual physical control of a vessel on the public waters of this state until the privilege to operate a vessel has been reinstated by the commissioner of motor vehicles.

(c)  A person under the age of 12 shall not operate a motorboat powered by more than six horsepower on the public waters of this state.

(d)  If an operator of a vessel is under the age of 16 but at least 12 years of age, that operator must be under the direct supervision of a person 18 years of age or older.

Sec. 3.  23  V.S.A. §3305b (a) is amended to read:

§ 3305b.  BOATING SAFETY EDUCATION; RULES

(a)  When required.  A person born after January 1, 1974 shall not operate a motorboat or a personal watercraft on the public waters of this state without first obtaining a certificate of boating education.

Thereupon, Rep. Donahue of Northfield asked and was granted leave of the House to withdraw her amendment and the bill was read the third time and passed.

Third Reading; Bill Passed in Concurrence

With Proposals of Amendment

S. 18

Senate bill, entitled

An act relating to liability resulting from the use of genetically engineered seeds and plant parts;

Was taken up and pending third reading of the bill, Reps. Kilmartin of Newport City and Jewett of Ripton moved to propose to the Senate to amend the bill as follows:

     In Sec. 3, in new Chapter 210 of Title 6, by striking §4718, and by inserting a new §4718 to read:

§4718.  FORUM AND VENUE

     (a) The forum for an action relating to goods for agricultural use in Vermont shall be the courts of the state of Vermont.

(b) The venue for an action relating to goods for agricultural use in Vermont shall be the Vermont county in which one of the parties resides.  If neither party resides in the state, the venue may be any county in Vermont.

Which was agreed to on a Division vote. Yeas, 79.  Nays, 42.

Pending the question, Shall the bill pass? Rep. Sunderland of Rutland City demanded the Yeas and Nays, which demand was sustained by the Constitutional number.  The Clerk proceeded to call the roll and the question, Shall the bill pass? was decided in the affirmative.  Yeas, 137.  Nays, 7.

 

Those who voted in the affirmative are:


Acinapura of Brandon

Adams of Hartland

Allaire of Rutland City

Ancel of Calais

Aswad of Burlington

Atkins of Winooski

Audette of S. Burlington

Baker of West Rutland

Barnard of Richmond

Bartlett of Dover

Bohi of Hartford

Bostic of St. Johnsbury

Botzow of Pownal

Branagan of Georgia

Brennan of Colchester

Brooks of Montpelier

Canfield of Fair Haven

Chen of Mendon

Clark of St. Johnsbury

Clarkson of Woodstock

Condon of Colchester

Copeland-Hanzas of Bradford

Corcoran of Bennington

Cross of Winooski

Darrow of Dummerston

Dates of Shelburne

DePoy of Rutland City

Donaghy of Poultney

Donahue of Northfield

Donovan of Burlington

Dostis of Waterbury

Dowland of Holland

Dunsmore of Georgia

Edwards of Brattleboro

Emmons of Springfield

Endres of Milton

Errecart of Shelburne

Evans of Essex

Fallar of Tinmouth

Fisher of Lincoln

Flory of Pittsford

Frank of Underhill

French of Randolph

Gervais of Enosburg

Grad of Moretown

Green of Berlin

Haas of Rochester

Head of S. Burlington

Heath of Westford

Helm of Castleton

Hosford of Waitsfield

Houston of Ferrisburgh

Howard of Rutland City

Howrigan of Fairfield

Hube of Londonderry

Hudson of Lyndon

Hunt of Essex

Hutchinson of Randolph

Jerman of Essex

Jewett of Ripton

Johnson of South Hero

Johnson of Canaan

Kainen of Hartford

Keenan of St. Albans City

Kennedy of Chelsea

Keogh of Burlington

Kilmartin of Newport City

Kiss of Burlington

Kitzmiller of Montpelier

Koch of Barre Town

Komline of Dorset

Krawczyk of Bennington

Kupersmith of S. Burlington

Larocque of Barnet

Larson of Burlington

LaVoie of Swanton

Lawrence of Lyndon

Leriche of Hardwick

Lippert of Hinesburg

Livingston of Manchester

Lorber of Burlington

Louras of Rutland City

Maier of Middlebury

Malcolm of Pawlet

Marcotte of Coventry

Marek of Newfane

Marron of Stowe

Martin of Springfield

Martin of Wolcott

Masland of Thetford

McAllister of Highgate

McCullough of Williston

McLaughlin of Royalton

Milkey of Brattleboro

Miller of Shaftsbury

Minter of Waterbury

Molloy of Arlington

Monti of Barre City

Mook of Bennington

Morley of Barton

Morrissey of Bennington

Myers of Essex

Nease of Johnson

Niquette of Colchester

Nitka of Ludlow

Nuovo of Middlebury

Obuchowski of Rockingham

O'Donnell of Vernon

Orr of Charlotte

Otterman of Topsham

Parent of St. Albans City

Partridge of Windham

Pellett of Chester

Perry of Richford

Peterson of Williston

Pillsbury of Brattleboro

Potter of Clarendon

Pugh of S. Burlington

Reese of Pomfret

Rodgers of Glover

Rusten of Halifax

Seibert of Norwich

Severance of Colchester

Shand of Weathersfield

Sharpe of Bristol

Shaw of Derby

Smith of New Haven

Sunderland of Rutland Town

Sweaney of Windsor

Tracy of Burlington

Trombley of Grand Isle

Valliere of Barre City

Westman of Cambridge

Winters of Swanton

Winters of Williamstown

Wright of Burlington

Zuckerman of Burlington


 

Those who voted in the negative are:


Allard of St. Albans Town

Deen of Westminster

Larrabee of Danville

McFaun of Barre Town

Miller of Elmore

Smith of Morristown

Young of Orwell


Those members absent with leave of the House and not voting are:


Clark of Vergennes

Klein of East Montpelier

Metzger of Milton

Peaslee of Guildhall

Randall of Troy


 

Bill Read Second Time; Third Reading Ordered

H. 549

Rep. Evans of Essex spoke for the committee on Government Operations.

House bill entitled

An act relating to international trade;

Having appeared on the Calendar one day for notice, was taken up, read the second time and third reading ordered.

Senate Proposal of Amendment Not Concurred in;

Committee of Conference Requested

H. 109

The Senate proposes to the House to amend House bill, entitled

An act relating to reauthorization of the human resources investment council;

     By striking all after the enacting clause and inserting in lieu thereof the following:

Sec. 1.  10  V.S.A. § 541 is added to read:

§ 541.  HUMAN RESOURCES INVESTMENT COUNCIL; STATE WORKFORCE INVESTMENT BOARD; MEMBERS, TERMS

(a)  The human resources investment council is created as the successor to and the continuation of the governor’s human resources investment council and shall be the state workforce investment board under Public Law 105-220, the Workforce Investment Act of 1998 and any reauthorization of that act.  The council shall consist of members as required under the federal act, including a representative of the Abenaki Self-Help Association, and the following:  two members of the study committee on international trade and state sovereignty established by 3 V.S.A. § 23; the president of the Vermont student assistance corporation; the president of the Association of Vermont Independent Colleges; the president of the University of Vermont; the chancellor of the Vermont state colleges; at least two representatives of labor appointed by the governor in addition to the two required under the federal act, at least one of whom shall be chosen from names submitted by labor organizations; one representative of the low income community appointed by the governor; two members of the senate appointed by the senate committee on committees; and two members of the house appointed by the speaker.  In addition, the governor shall appoint enough other members who are representatives of business or employers so that one-half plus one of the members of the council are representatives of business or employers.  At least one-third of those appointed by the governor as representatives of business or employers shall be chosen from a list submitted by the regional workforce investment boards.  In this section, “representative of business” means a business owner, a chief executive operating officer, or other business executive, and “employer” means an individual with policy‑making or hiring authority, including a public school superintendent or school board member and including representatives from the nonprofit, social services, and health sectors of the economy.  If there is a dispute as to who is to represent an interest as required under the federal law, the governor shall decide who shall be the member of the council.

(b)  Members representing business, employers, labor, and the low income community shall be appointed for terms of three years.  Appointed members, except legislative appointees, shall serve at the pleasure of the governor.

(c)  A vacancy shall be filled for the unexpired term in the same manner as the initial appointment.

(d)  The governor shall appoint one of the business or employer members to chair the council.

(e)  The human resources investment council shall appoint four other members who, in addition to the chair, shall be the executive committee.

(f)  Members, other than legislative members, shall be entitled to compensation and expenses as provided in 32 V.S.A. § 1010.  Legislative members shall be entitled to compensation and expenses as provided in 2 V.S.A. § 406.

(g)  The commissioner of labor shall appoint an executive director to the council, which shall be an exempt position and shall provide the council with administrative support.

(h)  The human resources investment council shall be subject to subchapters 2 and 3 of chapter 5 of Title 1, relating to public meetings and access to public records.

(i)  The human resources investment council shall:

(1)  Meet at least three times per year.  Members missing more than two consecutive meetings may be replaced.

(2)  Advise the governor on the establishment of an integrated network of workforce education and training for Vermont.

(3)  Coordinate planning and services for an integrated network of workforce education and training and oversee its implementation.

(4)  Establish and oversee workforce investment boards as provided in section 542 of this title.

(5)  Establish performance goals for regional workforce investment boards.

(6)  Establish goals for and coordinate the state’s workforce education and training policies.

(7)  Receive annual reports from the department of employment and training on the workforce education and training revenues and expenditures of agencies and institutions which are members of the council.

(8)  Annually review and comment on workforce education and training revenues and expenditures of member agencies and institutions.

(9)  Negotiate memoranda of understanding between the council and agencies and institutions involved in Vermont’s integrated network of workforce education and training in order to ensure that each is working to achieve annual objectives developed by the council.

(10)  Carry out the duties assigned to the state workforce investment board, as required for a single-service delivery state, under P.L. 105-220, the Workforce Investment Act of 1998, and any amendments that may be made

to it.

(11)  Collaborate with the study committee on international trade and state sovereignty with respect to the effects of international agreements on the state’s work force, and make recommendations on those matters to the governor and the general assembly to assist in determinations as to whether the state should consent to participate in various international treaties negotiated by the United States Government;

Sec. 2.  STUDY; REPORT

The human resources investment council shall study and recommend a legislative proposal to reorganize the workforce investment boards into geographic regions aligned with the flow of commerce in the state.  The council shall report its recommendation to the house committee on commerce and the senate committee on economic development and general affairs on or before January 15, 2006.

Sec. 3.  21 V.S.A. § 1306a is added to read:

§ 1306a.  LABOR MANAGEMENT ADVISORY COUNCIL; MEMBERS; TERMS

(a)  The commissioner shall appoint a state labor advisory council composed of eight members to include four employer representatives and four employee representatives who may fairly be regarded as representative because of their vocations, employment, and affiliations.  Appointment of the four employee representatives, at least one of whom shall have experience in workers’ compensation law, shall be made from qualified names submitted by the Vermont State Labor Council, the Vermont State Employees’ Association, and the Vermont National Education Association.  Appointment of the four employer representatives shall be made from qualified names submitted by the Vermont Chamber of Commerce, Associated General Contractors of Vermont, and the Vermont Business Roundtable.

(b)  The council shall advise the commissioner in formulating policies by discussing problems relating to the administration of duties and functions assigned to the department in order to bring impartiality and freedom from political influences to the solution of these issues.

(c)  The commissioner may establish subcommittees composed solely of labor or management representatives and use a portion of the council’s meeting time to meet with these subcommittees.

(d)  The council shall meet at least six times per year.

(e)  Each member of the council who is not a salaried official or state employee or is not otherwise compensated through employment while attending council meetings is entitled to per diem compensation and reimbursement for expenses as provided in 32 V.S.A. § 1010.

(f)  The members of the council shall be appointed by the commissioner for staggered terms of four years.  Of the first members appointments, one employer and one employee representative shall be for a one-year term, one employer and one employee representative for a two-year term, one employer and employee representative for a three-year term, and one employer and one employee representative for a four-year term.  Any appointment to a vacancy shall be for the unexpired term.

* * * Vocational Rehabilitation Rule * * *

Sec. 4.  21 V.S.A. § 641(a) is amended to read:

(a)  When as a result of an injury covered by this chapter, an employee is unable to perform work for which the employee has previous training or experience, the employee shall be entitled to vocational rehabilitation services, including retraining and job placement, as may be reasonably necessary to restore the employee to suitable employment.  Vocational rehabilitation services shall be provided as follows:

* * *

(3)  The commissioner shall adopt rules to assure that a worker who requests services or who has received more than 90 days of continuous temporary total disability benefits is timely and cost-effectively screened for benefits under this section.  The rules shall:

(A)  Provide that all vocational rehabilitation work, except for initial screenings, be performed by a Vermont-certified vocational rehabilitation counselor including counselors currently certified pursuant to the rules of the department.  Initial screenings shall be performed by an individual with sufficient knowledge or experience to perform adequately the vocational rehabilitation screening functions. 

(B)  Provide for an initial screening to determine whether a full assessment is appropriate.  An injured worker who is determined to be eligible for benefits shall have an appropriate initial vocational a full assessment shall be timely assessed and be offered appropriate vocational rehabilitation services. 

(C)  The commissioner shall adopt rules to provide Provide a mechanism for a periodic review and timely screening of injured workers who are initially found not to be ready or eligible for vocational rehabilitation services a full assessment to determine whether a full assessment has become appropriate. 

(D)  Protect against potential conflicts of interest in the assignment and performance of initial screenings.

(E)  Assure the injured worker has a choice of a vocational rehabilitation counselor. 

* * *

(5)  The commissioner may set by rule reasonable reimbursement rates for vocational rehabilitation benefits and services, provided access to vocational rehabilitation services is not diminished, and reasonable choices and access to benefits and services are maintained.  The reimbursement shall reflect the current market hourly rate of vocational rehabilitation services as determined by a survey of vocational rehabilitation providers, including solo practitioners, small firms, and large firms.  The fee schedule shall require the individual vocational rehabilitation counselor who provides services to review, initial, and certify the accuracy of the billing.

(6)  The commissioner shall make annual reports to the general assembly on the success and status of the workers’ compensation vocational rehabilitation program.

* * * Discontinuance of Benefits * * *

Sec. 5.  21 V.S.A. § 643a is amended to read:

§ 643a.  DISCONTINUANCE OF BENEFITS

Unless an injured worker has successfully returned to work, an employer shall notify both the commissioner and the employee prior to terminating benefits under either section 642 or section 646 of this title.  The notice of intention to discontinue payments shall be filed on forms prescribed by the commissioner and shall include the date of the proposed discontinuance and the reasons for it.  The liability for the payments shall continue for 7 seven days after the notice is received by the commissioner and the employee.  Those payments shall be made without prejudice to the employer and may be deducted from any amounts due pursuant to section 648 of this title if the commissioner determines that the discontinuance is warranted or if otherwise ordered by the commissioner.  Every notice shall be reviewed by the commissioner to determine the sufficiency of the basis for the proposed discontinuance.  If, upon review, the commissioner finds that the evidence does not reasonably support the proposed discontinuance, the commissioner may shall order that payments continue until a hearing is held and a decision is rendered.  If the commissioner’s decision, after a hearing, is that the employee was not entitled to any or all benefits paid between the discontinuance and the final decision, upon request of the employer, the commissioner may order that the employee repay all benefits to which the employee was not entitled.  The employer may enforce such a repayment order in any court of law having jurisdiction of the amount involved.

* * * Failure to Pay Benefits * * *

Sec. 6.  21 V.S.A. § 650(e) is amended to read:

(e)  If weekly compensation benefits or weekly accrued benefits are not paid within 21 days after becoming due and payable pursuant to an order of the commissioner, or in cases in which the overdue benefit is not in dispute, ten percent of the overdue amount shall be added and paid to the employee, in addition to interest and any other penalties.  In the case of an initial claim, benefits are due and payable upon entering into an agreement pursuant to subsection 662(a) of this title, upon issuance of an order of the commissioner pursuant to subsection 662(b) of this title, or if the employer has not denied the claim within 21 days after the claim is filed.  Benefits are in dispute if the claimant has been provided actual written notice of the dispute within 21 days of the benefit being due and payable and the evidence reasonably supports the denial.  Interest shall accrue and be paid on benefits that are found to be compensable during the period of nonpayment.  The commissioner shall promptly review requests for payment under this section and, consistent with the criteria in department rule 10.13, shall allow for the recovery of reasonable attorney fees associated with an employee’s successful request for payment under this subsection.

* * * Interim Orders * * *

Sec. 7.  21 V.S.A § 662(b) is amended to read:

(b)  In the absence of an agreement pursuant to subsection (a) of this section, the employer or insurance carrier shall notify the commissioner and the employee in writing that the claim is denied and the reasons therefore.  Upon the employee’s application for a hearing under section 663 of this title, within 60 days, the commissioner may shall review the evidence upon which denial is based and if the evidence does not reasonably support the denial, the commissioner may shall order that payments be made until a hearing is held and a decision is rendered.  Payments pursuant to this subsection shall not be deemed an admission of liability by the employer nor shall such payments preclude subsequent agreement under subsection (a) of this section or prejudice the rights of either party to hearing or appeal under this chapter.  If the commissioner’s decision, after a hearing, is that the employee was not entitled to any or all benefits paid between the initial denial and the final decision, upon request of the employer, the commissioner may order that the employee repay all benefits to which the employee was not entitled.  The employer may enforce such a repayment order in any court of law having jurisdiction of the amount involved.  Nothing in this section shall require the commissioner to order payments pending a hearing if the commissioner concludes that the benefit at issue is not compensable regardless of the lack of evidence supporting the denial.  For the purposes of this section, any written communication by an unrepresented claimant that questions the denial of any benefit shall be deemed to be an application for hearing under section 663 of this title.  

* * * Lump Sum Payment * * *

Sec. 8.  21 V.S.A. § 652(c) is added to read:

(c)  Unless otherwise requested by the claimant, an order for a lump sum payment of permanent partial or permanent total disability benefits or a lump sum settlement of a disputed claim shall include a provision accounting for excludable expenses and prorating the remainder of the lump sum payment in the manner set forth by the Social Security Administration in order to protect the claimant’s entitlement to Social Security benefits.

Sec. 9.  REPEAL

(a)  10 V.S.A. § 542 (workforce investment boards) shall be repealed on July 1, 2008.

(b)  21 V.S.A. § 1306 (advisory council for the department of employment and training) is repealed as of the effective date of this act.

Sec. 9a.  21  V.S.A. §384(a), as amended by Sec. 1 of S. 80 of the 2005 session, is further amended to read:

(a) An employer shall not employ an employee at a rate less than $7.00 an hour and, beginning January 1, 2006, at a rate less than $7.25, and, beginning January 1, 2007, and on each subsequent January 1, the minimum wage rate shall be increased by the lesser of five percent or the average of: the Consumer Price Index, CPI-U, U.S. city average, not seasonally adjusted, or successor index, as calculated by the U.S. Department of Labor or successor agency for the 12 months preceding the previous September 1, whichever is smaller. The minimum wage shall be rounded off to the nearest $0.01.  An employer in the hotel, motel, tourist place, and restaurant industry shall not employ a service or tipped employee at a basic wage rate less than $3.65 an hour and beginning January 1, 2006, and every January 1 thereafter that rate shall be increased by the same percentage as the minimum wage under this section.  For the purposes of this subsection, “a service or tipped employee” means an employee of a hotel, motel, tourist place, or restaurant who customarily and regularly receives more than $30.00 per month in tips for direct and personal customer service.  If the minimum wage rate established by the United States government is greater than the rate established for Vermont for any year, the minimum wage rate for that year shall be the rate established by the United States government.

Sec. 10.  3 V.S.A. §§ 23 is added to read:

§ 23.  STATE ENTRY INTO OBLIGATIONS UNDER TREATY OR TRADE AGREEMENT; STUDY COMMITTEE ON INTERNATIONAL TRADE AND STATE SOVEREIGNTY

(a)  Definitions.  For the purposes of this section:

(1) “International Trade Agreement” means a trade agreement between the federal government and a foreign country to which the state, at the request of the federal government, is or may be a party.

(2) “International Trade Agreement” does not include a trade agreement between the state and a foreign country to which the federal government is not a party.

(b) Limitations.  Except as provided in subsection (c) of this section, no state official, including the governor, may:

(1) Bind the state to an international trade agreement; or

(2) Give consent to the federal government to bind the state to an international trade agreement.

(c)  State policy in general. It is the policy of the State of Vermont to decline to participate in an international trade agreement until the overall effects of that participation are fully and adequately considered, and are determined to be beneficial to the state.  The governor may bind the state or give consent to the federal government to bind the state to an international trade agreement only after receiving the formal recommendations of the study committee on international trade and state sovereignty with respect to that specific agreement, and only in situations in which the general assembly, after receiving those recommendations gives its assent by joint resolution or act of legislation or fails to enact an act or joint resolution to prohibit the governor from making that specific commitment.

(d)  State policy on specific trade agreements.

(1) The State of Vermont declines to participate in the CAFTA agreement, and formally withdraws the Governor’s consent, as expressed in a letter dated October 30, 2003 to Trade Representative Robert B. Zoellick, to the state’s participation in trade agreements with Morocco, Australia, the countries of the Central American Common Market and the South African Customs Union.

(e)  There is created a study committee on international trade and state sovereignty, to consist of the following:  two members of the Senate, appointed by the Committee on Committees; two members of the House, appointed by the Speaker;  the designated state point of contact; the attorney general or a designee; one representative of the state’s municipalities, appointed by the governor; four members of the public appointed by the governor as follows: a small business person, a small farmer, a representative of a nonprofit organization that promotes fair trade policies, and a representative of a Vermont based corporation that is active in international trade; three members of the public appointed by the Speaker of the House as follows: a health care professional, a person active in the organized labor community, and a member of a non-profit environmental organization; three members of the public appointed by the President Pro Tem of the Senate: one member of a nonprofit human rights organization, one representative of a Vermont based manufacturing business with 25 or more employees, and a representative of an economic development organization.

(f)  The committee shall assess and monitor the legal and economic impacts of trade agreements on state and local laws, state sovereignty, working conditions and the business environment.  It shall provide a mechanism for citizens and legislators to voice their concerns and recommendations and make policy recommendations to the general assembly and to the trade representatives of the United States government, which shall be designed to protect Vermont’s job, business environment and state sovereignty from any negative impact of trade agreements.  It may recommend legislation or preferred practices and shall work with interested groups in other states to develop means to resolve the conflicting goals and tension inherent in the relationship between international trade and state sovereignty.

(g)  In response to a request from the governor or the general assembly, or on its own initiative the committee shall consider and develop formal recommendations with respect to how the state should best respond to challenges and opportunities posed by a particular international agreement.  Formal recommendations on a specific international agreement shall be submitted to the governor and to the house and senate committees on judiciary, on government operations, and on natural resources and energy, and to the house committee on commerce and the senate committees on finance and on economic development, housing and general affairs.

(h)  The committee shall be entitled to staff services of the agency of commerce, the attorney general, the legislative council, the joint fiscal committee.

* * * Wood Products Manufacturing * * *

Sec. 11.  WOOD PRODUCTS MANUFACTURING TAX CREDITS; FINDINGS

The general assembly finds that the economic vitality within certain adjacent counties in the state with the highest unemployment rates is dependent on a limited number of employers that manufacture finished wood products.  In order to support the sustainability and vitality of the finished wood products industry, the general assembly further finds that income tax credits will provide financial assistance needed to maintain the economic well‑being of the communities that rely so heavily on this industry for the health of their economies.

Sec. 12.  32 V.S.A. § 5930y is added to read:

§ 5930y.  Wood Products Manufacturer Credit

(a)  Annually on or before February 1, the secretary of commerce and community development shall designate any two adjacent counties having at least five percent of their jobs provided by employers that manufacture finished wood products and having the highest unemployment rate in the state for at least one month in the previous calendar year.  Upon making a designation, the secretary shall send a written notice to the commissioner of taxes identifying the designated counties.

(b)  A credit against the income tax liability is available as follows:

(1)  There shall be a credit of two percent of the wages paid in the taxable year by an employer for services performed in a designated county or an adjacent county associated with the manufacture of finished wood products.  The credit shall be available to the employer in any year the county qualifies and for one year after a qualification ends.

(2)  The credit, either alone or in combination with any other credit allowed by this chapter, shall not reduce the income tax liability of the employer by more than 80 percent.

(3)  The recapture of development incentives established in subchapter 6 of chapter 47 of Title 3 shall apply to the tax credits in this section, except that the provisions of subsection 2512(c) of that title shall not apply to business relocation outside the designated counties.

Pending the question, Will the House concur in the Senate proposal of amendment? Rep. Keenan of St. Albans City moved that the House refuse to concur and ask for a Committee of Conference, which was agreed to.

Governor’s Veto Sustained

H. 524

House bill, entitled

An act relating to universal access to health care in Vermont;

The text of the communication from His Excellency, the Governor, whereby he vetoed and returned unsigned House Bill No. 524 to the House is as follows:

 

June 22, 2005

 

The Honorable Donald G. Milne

Clerk of the House of Representatives

State House

Montpelier, Vermont 05633-5401

 

Dear Mr. Milne:

 

I am returning H.524, An Act Relating to Universal Access to Health Care in Vermont, without my signature because of my objections described herein.

 

I remain fully committed to working collaboratively with all interested parties to achieve thoughtful and lasting reform of our health care system.  Our system does face many complex and difficult challenges, but we must meet these challenges. 

 

Overall health care spending in Vermont and the nation is increasing at an unsustainable rate.  Unless we take time to enact contemplative and meaningful reforms, higher health care costs are likely to result in a dramatically reduced public capacity to offer coverage in existing programs like Medicaid.  These same pressures are likely to result in reduced employee participation rates, fewer private options and greater numbers of uninsured Vermonters.

 

Slightly more than 90 percent of Vermonters are insured, and while Vermont’s insured rate is among the highest in the nation, I will not be satisfied until all Vermonters have access to health care coverage they can afford.

 

There is much that is commendable about Vermont’s health care system—most notably the efforts of our dedicated providers—but there is still much that can be done to improve quality, enhance safety and lower costs.

 

As we move forward with necessary reforms, it is important that the means chosen to address these problems are consistent with the values and expectations of the people of this state, and are financially sustainable for the employees, employers and families paying taxes. 

 

Accordingly, last year I set forth the principles that should guide efforts to achieve meaningful reform of Vermont’s health care system:

 

 

I am pleased that the General Assembly agreed with many of my Administration’s initiatives, which will result in real progress and help Vermont turn its attention back toward the need to lower costs. 

 

Two related initiatives included in the fiscal year 2006 budget—the Chronic Care and Health Care Information Technology initiatives—will positively impact both the cost and quality of care delivered in Vermont over time.  Both efforts have tremendous promise for improving Vermont’s health care infrastructure. 

 

Two provisions included in H.524—the Healthy Lifestyles Discount and the Consumer Price and Quality Information Program—would provide incentives for individual Vermonters to engage in healthy behavior, give them the tools they need to make cost-effective choices about health care and also help drive down cost and improve quality. 

 

I regret, however, that in most other respects H.524 falls far short of my Administration’s goals and principles for meaningful health care reform. 

 

H.524 would create a new, government-run, taxpayer financed health care program that would lead Vermont toward a system of fewer choices, fewer benefits and fewer health care providers. 

 

H.524 would also impose new payroll taxes on small businesses and non-profit organizations, and a regressive income tax surcharge on the working poor to finance the limited health care coverage it proposes.  Such a financing mechanism punishes low and moderate-income workers who are least able to afford these regressive taxes. 

 

This health care tax proposal would be extraordinarily harmful to Vermont’s small businesses and economy, and fails to account for the necessary revenue needed for its intended expansion in future years.  Moreover, throughout the legislative process concerns of health care providers, private sector employers, individual residents, and Executive Branch officials were ignored. 

 

The bill also fails to address the so-called Wal-Mart issue.

 

In fact, the Legislature’s proposal creates a tax scheme that benefits Wal-Mart sized multi-state and multi-national corporations at the expense of Vermont’s small, homegrown businesses. 

 

The measure fails to adequately define key phrases and intent, calls for unrealistic and unfunded demands on government personnel and leaves far too many questions unanswered.

 

In addition, and somewhat ironically, H.524 calls for a study commission intended to justify the millions of dollars in decisions the Legislature has already made, actions it has already taken and decisions is appears destined to make. 

 

Such a study—with  predefined outcomes—does not constitute the collaborative discussion required to achieve meaningful and lasting reform.  Such a study is also, if nothing else, an indication that this legislation has been advanced in great haste.

 

Finally, the bill would  impose inflexible caps on our regional hospitals. These caps might well force these important health care and economic resources to reduce services and eliminate jobs. 

 

The bottom line is that the numerous technical deficiencies and conceptual flaws of H.524—including an effort to commandeer Executive Branch functions—render it incapable of achieving its publicly stated goals. 

 

These principal deficiencies are enumerated in greater detail below.

 

I.  H. 524 Would Create a Government-Run Program that Limits Health Care Choices

H.524 proposes to create a new government-run program to provide taxpayer financed health care coverage to Vermonters.  As a first step this program would begin in July 2006 by offering a “bare bones” policy of primary and preventive care for all currently uninsured Vermonters. 

 

The bill’s schedule makes clear, however, that the legislation is intended to offer primary and preventive care for all Vermonters by July 2007, hospital and primary and preventive care to all Vermonters by October 2008, and comprehensive benefits to all Vermonters by July 2009.

 

The result of the legislation would therefore be a system of insurance dominated by the government  that competes with, and eventually eliminates, private health insurance options—an outcome with particularly negative consequences for the thousands of Vermonters  currently covered by comprehensive private insurance plans.

 

II.  H. 524 Would Increase Premiums for Vermonters with Private Insurance and Hurt Providers

During the three-year transition from the current coverage system to the full government-run program, Vermonters left in the private market will face higher and higher premiums as more and more costs are shifted from the Legislature’s plan to individuals paying insurance premiums.

 

If, as expected, the government’s provider payments are less than health insurance provider payments the difference will be cost-shifted to those Vermonters who pay premiums.  Such an exacerbation of the cost shift is fundamentally unfair.

 

Notwithstanding the words in the legislation that promise not to exacerbate the cost shift by providing “reasonable payments to health care professionals,” the history of the Medicaid and Medicare programs demonstrates that a public health care program always underpays health care professionals.  Additionally , the word “reasonable” is not defined to guarantee reimbursements that would in fact approach market rates.

 

The notion that this proposal would reduce the cost shift related to uncompensated care is incorrect.  Vermonters paying premiums will see no relief from the extra costs embedded in their premiums to pay for care for the uninsured. The Legislature’s plan will not offer hospital care until 2008 at the earliest, a date subject to available state revenues and contingent upon various conditions and benchmarks established in the bill.

 

As the Legislature’s proposal expands, less competitive reimbursement rates will make the recruitment and retention of doctors and other health care professionals increasingly difficult.  As a result, Vermonters will have fewer options when choosing a doctor or other provider, and greater limitations on treatment and benefits.  Sacrificing access to quality care is not an effective or desirable way to reduce costs.

 

In the end, this proposal would worsen the cost shift, increase costs for Vermonters who are currently insured, and reduce treatment options for Vermonters.  Such results are counter to my goal of lowering costs and increasing access, and therefore unacceptable.

 

III.  H. 524 Leads to Health Care Rationing

Concentrated power in a dominant government program, combined with the financial pressures to meet the annual costs of coverage, will result in government rationing of health care under this proposal. 

 

While there is some measure of truth in the assertion that all health care coverage systems contain some degree of “rationing” because no system can afford to provide unlimited health care benefits, a system where all participants (including patients, providers, and payers) face constraints and must be accountable to other participants, is far more likely to be responsive than a single government agency with near absolute power constrained only by the General Assembly.

 

Presumably, the reason for the minimal coverage offered at the outset is because that is all the General Assembly believes it can afford to offer, given the program’s dependence on public financing.  However, offering a minimal preventive plan has a limited cost containment benefit considering the fact that a majority of health insurance spending is for specialty care and hospital claims.  

 

Nevertheless, similar decisions and trade-offs regarding the scope of benefits can be expected in the future as the program is forced to reduce benefits and treatment choices to fit expenditures within somewhat unpredictable annual state revenues.

 

IV.  H. 524 Hurts Local Hospitals, Reduces the Quality of Care and Costs Regional Jobs

One of the primary cost containment tools authorized by H.524 is an inflexible, annual cap on hospital budgets.

 

Based on the Legislature’s formula, the cap could be as low as 3 percent in some years. This could result in salary freezes and layoffs, as well as the possibility of not allowing any medical technology purchases like new dialysis equipment or other advances that improve quality. 

 

Expenditures, such as financing health care information technology systems that might very well save money, as well as improve quality in the long run, could be prohibited under the spending cap.  This is deeply flawed public policy and counter to our efforts to enact reforms that lower costs and increase access.

 

Since the spending cap is also to be applied on a statewide basis, it will pit hospital against hospital, and region against region every year.  It is possible that the largest hospitals would fare the best, winning a disproportionate percentage of the limited resources.

 

Ironically, the legislation seems to acknowledge some of the flaws identified above by offering the agency charged with administering and regulating the spending cap system the authority to adjust an individual hospital’s spending cap based on “exceptional or unforeseen circumstances,” and a further exception is made for “significant unbudgeted increase in volume.”   This sizeable loophole illustrates the failed reasoning behind arbitrary and inflexible caps.

 

Under the Legislature’s proposal, residents of each region of the state would face the prospect of not knowing from year to year how the hospital they rely on will fare in its annual competition for resources with other regions.  If the spending cap is administered as strictly as it appears in the bill, it is likely that hospitals will be forced to dramatically reduce their services—forcing Vermonters to travel long distances for necessary treatment.

 

V.  H. 524 May Limit Where Residents Can Go for Care

The legislation also proposes a “global hospital payment” and “organizational structures that integrate the delivery of care” on a regional basis.

 

A global payment would likely require a defined territory for each hospital.  Carrying this to its logical conclusion, it would mean that a resident in one region would be required to go to the hospital serving that area, and to a physician practice also located there. 

 

Vermonters want to be able to choose the hospital where their child is born, and where they see their doctor—unfortunately, H.524 fails to account for this.

 

VI.  Ultimately, Cost Increases Would Render the Program Unsustainable

It is highly unlikely that the proposed program could achieve any reasonable cost containment without jeopardizing the viability of community hospitals, lowering reimbursements to providers and forcing Vermonters into rationed care plans.

 

The burden on taxpayers of maintaining the program would as a result become unsustainable.  Given the history of Vermont’s other public health care program, this scenario is very possible. 

 

This year Vermont faced an $80 million deficit in the Medicaid program.  The structural problems in Medicaid have been apparent for many years, but the General Assembly has been reluctant to act until the problem reaches a crisis level. 

 

Plainly put, it would be irresponsible to impose on Vermonters another government health care system with similarly unpredictable and unsustainable management and structural designs.

 

VII.  Policies of the Past are not the Solutions of the Future

For more than a decade, the Vermont Legislature enacted many health care mandates over the objection of state regulators and others who expressed concerns about the cost of health insurance. 

 

Many of these decisions, as predicted by the same regulators, have resulted in fewer choices and higher health insurance costs—moving Vermont further from its goal of universal access to affordable health insurance coverage.   In many ways, most notably in the intent to create a new government-run system, H.524 is a continuation of this failed public policy. 

 

VIII.  H. 524 Imposes Punitive Payroll and Regressive Income Taxes

The health care coverage proposed by H.524 is financed by punitive payroll taxes on small businesses and non-profit organizations, and a highly regressive income tax surcharge on individuals who presently cannot afford health insurance. 

 

While the tax rates may seem relatively low at the outset, the legislation makes clear that it will quickly expand its scope and offer broader benefits to all Vermonters by 2009.  The Legislature’s proposal would, at a minimum, need new tax revenue sufficient to pay for the cost of their yet to be defined health care benefits in 2009. 

 

The greatest burden imposed by the individual income tax surcharge will be on those uninsured Vermonters least able to afford  the tax.  While some may not be covered because they have not yet enrolled in Medicaid, most are not covered because they simply cannot afford it.  It therefore follows that they cannot afford a tax increase. 

 

Many of the uninsured also work for small businesses that cannot afford coverage. It makes little sense to increase taxes on these low and moderate income Vermonters, and offer in return an extremely limited policy that fails to offer some degree of protection from catastrophic health care expenses.

 

IX.  H. 524 Helps Wal-Mart Size Business and Hurts Small Homegrown Business

Small businesses are a crucial economic engine for Vermont’s economy. They will suffer if unreasonable taxation stifles growth in this sector.  Furthermore, imposing a payroll tax on small employers with slim profit margins is likely to result in lower wages for low and moderate-income employees, further exposing the regressive nature of the proposed tax.

 

Contrary to the oft-stated view of some legislators that large, retail employers are the primary culprits for the plight of uninsured Vermonters, survey data show that small businesses with fewer than 25 employees constitute the bulk of firms which do not offer coverage to their employees. 

 

Consequently, a payroll tax on small businesses that can least afford to offer coverage and least afford to pay the new taxes will very likely force many of them to eliminate jobs, lower wages, or leave Vermont altogether. 

 

Larger firms, like Wal-Mart, if they are even subject to this tax, are far more capable of paying it.  As small homegrown companies close, larger multi-state and multi-national corporations stand to benefit significantly from the increase in market share.

 

State government cannot be all things to all people and still sustain a vibrant economy that allows individuals and small businesses the freedom and flexibility to pursue their own non-governmental pursuits and create jobs. 

 

X.  H. 524 Jeopardizes Other State Services

The fiscal risks of the approach taken in H.524 for taxpayers and non-health care state programs alike are enormous.  The Legislature’s proposal would soon follow in the path of Medicaid and become the largest expense in the state budget, absorbing an ever-increasing share of tax revenues and denying resources to other priorities such as the environment, law enforcement and higher education programs, among others.

 

XI.  H. 524 Does Not Represent a True Consensus

H. 524 demonstrates a disappointing disregard for the need to collaborate and reach a broad non-partisan consensus. 

 

This bill would have benefited from the expert opinion and point of view of individuals, employers, health care providers and Executive Branch personnel.  Instead, the Legislature chose to ignore much of this counsel.  

 

For example, H.524 includes a provision mandating hospitals to charge uninsured Vermonters, no matter how wealthy, no more than the average discount rate of payment received from health insurers and other third party payers.  This provision was approved by the General Assembly despite the apparent absence of formal committee testimony and deliberation. 

 

If testimony from hospitals and hospital regulators had been taken, the General Assembly would have learned that there might be more appropriate and effective ways to address what the legislators believe to be a problem.

 

XII.  H. 524 Ignores the Technical Concerns and Sets Unrealistic Expectations of Executive Branch Agencies and Departments

Many other provisions of H.524 were approved by the General Assembly without serious consideration of the conceptual and technical concerns of the state agencies charged with implementing the bill.

 

For example, H.524 calls for the Office of Vermont Health Access (OVHA) to take the first steps needed to implement the new program in October 2005, to propose a budget for the plan in January 2006, to adopt payment methodology rules by February 2006, and to offer the benefit plan to uninsured Vermonters by July 2006.

 

The Tax Department is required by April 1, 2006 to create an entirely new tax system and program for the new payroll tax and the income tax surcharge, including the adoption of rules, the writing and printing of new and expanded forms, outreach and education to individuals and employers who would be paying the new tax, and actual collection of the new taxes.

 

H.524 calls for the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) to establish a new regulatory program to implement the hospital spending cap and global budget law, and to develop mechanisms to monitor whether employers are dropping coverage of employees because of the new government program.

 

Each of these agencies repeatedly expressed explicit concerns to the General Assembly that the time lines and expectations imposed by H.524 were unrealistic, and that the agencies charged with implementing the new programs had not been appropriated the resources needed to accomplish the intent of the legislation. 

 

H.524 also includes an extraordinary grant of authority to the Legislative Commission on Health Care Reform.  According to the bill, all Executive Branch agencies would be obligated to “report to the Commission at such times and with such information as the Commission determines is necessary to fulfill its oversight responsibilities.”  This constitutes unlimited power to demand whatever information, services and analysis the Commission wants from the Executive Branch, regardless of the cost or demands upon staff resources and implications for other essential programs.

 

These are not issues of health care policy debate, or matters of partisan dispute, yet the General Assembly refused to listen and ignored the facts, choosing instead to push ahead with great haste.

 

XIII.  Provisions of H. 524 Ignore the Traditional Separation of Powers

The Vermont Constitution, Chapter II, Article 3, provides that the Governor and his or her Executive Branch agencies shall exercise the executive power of the State of Vermont. Portions of H.524 appear to cross the line separating the legitimate lawful role of the Legislative and Executive Branches of government. 

 

One section of H. 524 confers on the Legislative Commission on Health Care Reform the power to use $20 million in taxpayer funds beginning in 2007 to issue requests for proposals, and to administer grants for the development of “integrated systems of care” pilot projects.  This section goes far beyond the traditional and appropriate role of the Legislative Branch.

 

H.524 also exhibits a desire by the General Assembly to discount the expertise of the Executive Branch in health care policy.  The reform of Vermont’s health care system is too important to be left only to the Legislature.  Real reform requires the collaboration of the Legislative and Executive Branches of government, employers, health care providers, and individual Vermonters who will be affected. 

 

XIV.  H. 524 Refuses to Recognize the Role of the Executive Branch in Reform

H.524 creates the Legislative Commission on Health Care Reform and delegates to the Commission the critical functions of the Legislature’s plan, in particular a series of studies intended to justify decisions already made, actions they have already taken and decisions they intend to make.

 

The studies to be conducted by this Commission are crafted in a manner that would appear to have a preordained result—a new government-run, taxpayer financed health care rationing plan.

 

The economic impact study directs a comparison of their proposal with the effect of the current system, without including in the comparison more realistic and responsible reforms that have been proposed.  Furthermore, it is irresponsible to hastily impose a new system of taxation without first studying its full economic impact.

 

The financing study is designed to focus on public, taxpayer financing as the preferred means of financing health care in Vermont and suggests a reluctance to consider alternatives.

 

In addition, the General Assembly had a choice of whether to include on the Commission members appointed by the Governor on an equal footing, and individuals from outside of government.  The General Assembly chose to constitute the Commission with eight legislators. 

 

The Executive will appoint two members, but these appointees are considered so insignificant that they are not given any authority to vote on the critical decisions of the Commission.  No private individuals or health policy experts were included.

 

Broad representation and participation is not only fair, but also would have made the process of health care reform far more likely to succeed. 

 

If the General Assembly seeks a health care reform outcome that will be successful, and that reflects a broad consensus among the many individuals and groups affected, it must include all interested parties in the dialogue.

 

Instead, the General Assembly has appropriated to itself $775,000 to create a legislative bureaucracy and fund a public relations campaign promoting the preordained outcome of its studies.

 

XV.  H. 524 Would Not Reduce Administrative Costs Because it Fails to Account for ERISA, Medicare & Medicaid

In 2003, 27 percent of Vermonters were insured by ERISA plans that are exempt from state regulation, and 35 percent of Vermonters were insured by Medicare or Medicaid. 

 

Even if the Legislature’s plan offers a comprehensive benefit to all Vermonters by 2009, federal ERISA law still allows large employers to design and fund their own employee benefit plans, and Medicare and other federal coverage programs will still exist. 

 

As a result, there is unlikely to be any reduction in administrative costs at the level anticipated by advocates of new or consolidated government health care programs; a multi-payer system will still exist.  For the same reasons, it is likely that cost shifting to other Vermonters will continue to be a problem.

 

XVI.  H. 524 Would Lead to Numerous Legal Challenges

The sections of H.524 outlining the limited benefit regime provide that “an individual aggrieved by an adverse decision” has a legal right to appeal the decision to the Human Services Board. 

 

While the section lacks a reasonable degree of specificity as to the standards and process for review, presumably this means that any beneficiary who wants a health care service, or services, not covered by the Legislature’s plan may appeal the decision to the eight-member Board. 

 

In addition, any hospital or specialist physician that believes they should be paid more than the Legislature’s plan allows can seek higher compensation through the same process.  Likewise, any pharmaceutical company that wants its drugs to be covered by their proposal will also have a legal right to seek a better deal.

 

Needless to say such a process could result in unnecessary and unreasonable increases in the programs expenditures, and substantially higher legal fees for the state—an observation that further exposes the unrealistic cost containment claims of this proposal.

 

XVII.  Definitions of “Uninsured” and “Resident” are Too Vague

In H.524 the definition of “uninsured” is very vague, and the definition of “Vermont resident” is very broad. 

 

An uninsured Vermonter might include someone who decides to drop his or her existing coverage to join the artificially less expensive government plan.  As a result, individuals with self-insured and private market plans will experience higher costs as Vermonters migrate to it.  Unfortunately, as the limits of the government plan become apparent to those who switch, there will be fewer and fewer affordable options to return to—eventually the only option for those individuals may be the government’s rationing program.

 

Also, if Vermonters insured in the private market decide to drop current coverage, or if businesses decide to drop coverage and pay the tax instead, or if residents from out of state decide to move to Vermont in order to receive expensive treatment not covered by insurance in their home state, there may be many more individuals enrolled in the program than estimated, and revenues may be inadequate to pay for their coverage without raising tax rates.

 

XVIII.  The Negotiated Payments Section is Flawed

H. 524 contemplates that payment amounts will be “negotiated” with hospitals and health care professionals.  The section as approved by the General Assembly is an unclear and flawed concept. 

 

What if OVHA and the hospitals, and health care professionals cannot reach an agreement?  It does not appear that the legislation delegates to OVHA the authority, at the end of failed negotiations, to set a payment amount. 

 

Does this mean OVHA is obligated to pay providers whatever they want?  Or does it mean that OVHA will set a payment amount, but the hospital or health care professional is authorized to appeal the decision to the Human Services Board?  Could a basis for appeal be that OVHA failed to adequately consider the “actual costs” of the hospital or health care professional? 

 

If so, this provision has the potential to be the source of significant medical inflation.

 

XIX.  The Payroll Tax is Open to an ERISA Challenge

The payroll tax in H.524 is vulnerable to an ERISA challenge. 

 

A plausible and persuasive claim can be made that because, as a practical matter, the tax will be imposed principally on businesses that do not offer health coverage, the tax is nothing less than a legal mandate to offer coverage, or to offer a higher level of coverage than the business would otherwise offer.  ERISA prohibits states from requiring employers to offer health care coverage, or from requiring employers to offer a prescribed level of benefits.

 

XX.  H. 524 Payroll Tax Revenue Estimates are Incomplete

The revenue estimate of the health care tax on employers ($28.3 million in 2006) is a conservative approximation. The analysis is restricted only to private employers offering no health insurance, and should also include the application of the tax on entities that offer a low level of health insurance at a cost less than the 3 percent tax. 

 

In addition, it is difficult to determine how many firms offering health insurance to their employees will be affected by the tax, and how much additional revenue will be collected.  More time should be taken, and more in-depth analysis conducted, to evaluate the impact of the payroll tax on Vermont’s small businesses and non-profits, and to develop a more accurate estimate of the revenue that will be raised from the tax.

 

XXI.  H. 524 Income Surcharge Tax Revenue is Likely Overstated

The administration has found that assumptions of income growth in the uninsured population are too high and the assumed growth in the base due to increases in the uninsured pool is likely to be far too generous.  Therefore, the revenue estimate of $15.6 million from the income tax surcharge is very likely overstated.

 

By utilizing more conservative assumptions of income inflation (1 percent vs. 3.2 percent) and income growth resulting from increases in the number of uninsured (assuming only 80 percent of new uninsured have a positive Adjusted Gross Income), the revenue estimate could be overstated by as much as $2 million. 

 

As with the payroll tax calculations, and other areas of this bill, this legislation would have benefited from a more complete analysis of the income tax surcharge on the low and moderate income Vermonters who would be obligated to pay it.  Likewise, the Legislature should have developed a more accurate estimate of the revenue that will be raised from the tax.

 

A key unresolved question for the income tax surcharge is how it addresses the many individuals who are not required to file income returns.  H. 524 would impose a health care tax filing requirement on virtually every resident who is subject to income tax, regardless of whether they are required to file under the current tax code. 

 

Many individuals who work may not have a current requirement to file.  Many individuals who file are not required to file except to obtain a withholding refund.  Also, many people with low Adjusted Gross Income are required to file because of low thresholds for certain types of income. For example, married couples are usually not required to file if their gross income is less than $15,900, but a couple with $400 of self employment income is required to file, even if they have no other income.  More thought should have been given to these, and other, implications—and the resulting complications—before moving forward with a regressive income tax surcharge on the working poor. 

 

XXII.  H. 524 Calls for an Unrealistic Insurance Policing System

H.524 directs BISHCA to “monitor whether persons who enroll in the Green Mountain Health insurance program were formerly covered by health insurance, and whether former insurance was self-paid or paid by an in-state or out-of-state employer.” 

 

The legislation does not, however, indicate how this monitoring activity is to be accomplished, what resources are available to conduct such activity, or what authority has been conferred on BISHCA to carry out this task.

 

XXIII.  H. 524 Contains Many Other Poorly Designed Provisions

The Pharmacy Cost Control section of the legislation, proposes a statewide preferred drug list (PDL) to include all Vermont health benefit plans. There is no certainty of any savings here, especially for the Medicaid program, because the number of Vermont-only lives will not generate the same rebates as the Medicaid pool that Vermont participates in that now includes ten states and 3.5 million lives. 

 

In addition, Pharmacy Benefit Managers (PBMs) serving other Vermont insurers may not be able to duplicate rebates for all products in a single, Vermont PDL if they are not able to pool lives from other, out-of-state lines of business.

 

The legislation also proposes negotiating with manufacturers for lower prices including negotiating supplemental rebates.  Approval of Vermont’s supplemental rebates by the federal Centers for Medicare and Medicaid Services (CMS) prohibited using Medicaid to leverage rebates in any other program including publicly funded programs.  CMS has since allowed that they will consider permitting the inclusion of publicly funded programs but there has been no response to the formal request, and approval is unlikely for coverage for state employees or coverage under other state programs.

 

The Pharmacy Benefit Management section of the bill is modeled after legislation enacted in Maine.  The Maine law is the subject of a pending lawsuit claiming that the statute violates the federal ERISA law.  Litigation in Vermont can therefore be anticipated.

 

PBMs have been very effective at consolidating consumer and payer bargaining power to achieve cost savings through negotiations with pharmaceutical manufacturers.  While many individuals argue that PBMs have abused their market power, PBMs claim that directives such as the Maine law will cost consumers more.  It would be more responsible to take the time needed to fully evaluate the impact of this section on Vermont’s health care costs.

 

Conclusion

We are indeed very fortunate to have a medical community that provides high quality care; and when we need them most, they are there for us.  The doctors, nurses, nurse practitioners, aides, technicians, and the administrative staffs at our hospitals, practices and clinics are intelligent, competent, hardworking, and dedicated to providing the highest quality patient care possible.

 

Complementing our primary care system is a family of community health services, and pro bono services so that no one who needs immediate care is turned away for lack of insurance.

 

Vermont must, however, continue to confront a serious health care crisis.  Health care costs are simply too high for many Vermonters.  For working families and their employers, insurance premiums have skyrocketed while low cost options are being eliminated as insurance providers abandon Vermont’s burdensome regulatory regime. 

 

Patients are at risk of losing more direct control of their care and government is already failing to reimburse doctors and hospitals for the cost of treating the nearly one in four Vermonters covered by the state Medicaid program.  As a result, those costs are shifted to the overwhelming majority of Vermonters who pay escalating private insurance premiums.

 

Vermont has the second most generous Medicaid program in the nation, and as a result we are headed for an unsustainable, multi-million deficit in the Health Access Trust Fund.  This deficit represents a serious threat to the most vulnerable Vermonters who rely on this program and the taxpayers who fund it.

 

The worst thing we could do is rely entirely on expanded government programs for reform, a course that would cause Medicaid, and perhaps the health care system as a whole, to crumble under the burden of its own weight.  Instead, we must save Medicaid in a responsible way and develop reforms that will lower costs, improve quality and achieve universal access to affordable health care coverage. 

 

True reform must be comprehensive. We need to do more than just change the financing method.  If costs continue to increase at the current rate, it won’t matter what pocket the money comes from because they’ll all be empty. 

 

We need to tackle the root causes of rising health care costs, open our system up to low cost options, encourage healthy decisions and preventive care, and attack health concerns at their inception.  And we need to maintain a patient-centered system that offers more individual choice and keeps health care decisions in the hands of patients and doctors, not government bureaucrats.

 

Working together, universal access to affordable health insurance is a goal we can achieve in our state, but H.524 moves Vermont in the wrong direction. 

 

Therefore, based on my objections to H.524 as outlined above, and others, I am returning the bill unsigned to the House pursuant to Chapter II, §11 of the Vermont Constitution. 

 

Sincerely,

s/s James H. Douglas

Governor”

 

The bill was taken up and pursuant to Chapter II, Article 11, of the Vermont Constitution the Clerk proceeded to call the roll and the question, Shall the bill pass, the failure of the Governor to approve notwithstanding? was decided in the negative.  Yeas, 81.  Nays, 63.  A 2/3 vote of 96 needed.

 

Those who voted in the affirmative are:


Ancel of Calais

Aswad of Burlington

Atkins of Winooski

Audette of S. Burlington

Barnard of Richmond

Bohi of Hartford

Botzow of Pownal

Brooks of Montpelier

Chen of Mendon

Clarkson of Woodstock

Condon of Colchester

Copeland-Hanzas of Bradford

Cross of Winooski

Darrow of Dummerston

Deen of Westminster

Donovan of Burlington

Dostis of Waterbury

Dowland of Holland

Edwards of Brattleboro

Emmons of Springfield

Evans of Essex

Fallar of Tinmouth

Fisher of Lincoln

Frank of Underhill

French of Randolph

Gervais of Enosburg

Grad of Moretown

Green of Berlin

Haas of Rochester

Head of S. Burlington

Heath of Westford

Hosford of Waitsfield

Howard of Rutland City

Howrigan of Fairfield

Hunt of Essex

Hutchinson of Randolph

Jerman of Essex

Jewett of Ripton

Johnson of South Hero

Keenan of St. Albans City

Keogh of Burlington

Kiss of Burlington

Kitzmiller of Montpelier

Klein of East Montpelier

Kupersmith of S. Burlington

Larson of Burlington

Leriche of Hardwick

Lippert of Hinesburg

Lorber of Burlington

Maier of Middlebury

Malcolm of Pawlet

Marek of Newfane

Martin of Springfield

Martin of Wolcott

Masland of Thetford

McCullough of Williston

McLaughlin of Royalton

Milkey of Brattleboro

Miller of Shaftsbury

Minter of Waterbury

Monti of Barre City

Nease of Johnson

Nitka of Ludlow

Nuovo of Middlebury

Obuchowski of Rockingham

Orr of Charlotte

Partridge of Windham

Pellett of Chester

Perry of Richford

Pillsbury of Brattleboro

Potter of Clarendon

Pugh of S. Burlington

Reese of Pomfret

Seibert of Norwich

Shand of Weathersfield

Sharpe of Bristol

Smith of Morristown

Sweaney of Windsor

Tracy of Burlington

Trombley of Grand Isle

Zuckerman of Burlington


Those who voted in the negative are:


Acinapura of Brandon

Adams of Hartland

Allaire of Rutland City

Allard of St. Albans Town

Baker of West Rutland

Bartlett of Dover

Bostic of St. Johnsbury

Branagan of Georgia

Brennan of Colchester

Canfield of Fair Haven

Clark of St. Johnsbury

Corcoran of Bennington

Dates of Shelburne

DePoy of Rutland City

Donaghy of Poultney

Donahue of Northfield

Dunsmore of Georgia

Endres of Milton

Errecart of Shelburne

Flory of Pittsford

Helm of Castleton

Houston of Ferrisburgh

Hube of Londonderry

Hudson of Lyndon

Johnson of Canaan

Kainen of Hartford

Kennedy of Chelsea

Kilmartin of Newport City

Koch of Barre Town

Komline of Dorset

Krawczyk of Bennington

Larocque of Barnet

Larrabee of Danville

LaVoie of Swanton

Lawrence of Lyndon

Livingston of Manchester

Louras of Rutland City

Marcotte of Coventry

Marron of Stowe

McAllister of Highgate

McFaun of Barre Town

Miller of Elmore

Molloy of Arlington

Mook of Bennington

Morley of Barton

Morrissey of Bennington

Myers of Essex

Niquette of Colchester

O'Donnell of Vernon

Otterman of Topsham

Parent of St. Albans City

Peterson of Williston

Rusten of Halifax

Severance of Colchester

Shaw of Derby

Smith of New Haven

Sunderland of Rutland Town

Valliere of Barre City

Westman of Cambridge

Winters of Swanton

Winters of Williamstown

Wright of Burlington

Young of Orwell


Those members absent with leave of the House and not voting are:


Clark of Vergennes

Metzger of Milton

Peaslee of Guildhall

Randall of Troy

Rodgers of Glover


 

Remarks Journalized

     Rep. Partridge of Windham moved that the remarks by  Rep. Symington of Jericho and Tracy of Burlington¸ be journalized, which was agreed to on a Division vote.  Yeas, 74.  Nays, 53.

Governor’s Veto of H. 524 Reflects
Differences in Approach to Health Care Reform

The message accompanying the veto of the Green Mountain Health Plan can be boiled down to two underlying themes. One, the Governor would like Vermonters to believe the outcome of the legislature’s ongoing work is a forgone conclusion (and he characterizes that conclusion in terms that Vermonters find objectionable). Secondly, the Governor and the legislature define health care reform in fundamentally different terms.

Legislators have determined that if Vermont is to control the sky-rocketing cost of health care we must reconfigure a health care system so that it is built around maintaining health, not fixing illness, and so that it is accessible to all Vermonters, regardless of their income or employment status. Prior to passage of H.524 we didn’t have a pre-determined means of achieving that end and we are now approaching the challenge with fresh eyes and new analysis. Legislators are willing to consider different approaches to achieving the goal of a coordinated system of care serving all Vermonters.

The Governor has simply decided to characterize the legislature’s work as leading to government controlled rationed health care. He raised this flag with each proposal the legislature put forward this past year, despite the various changes and accommodations legislators made throughout the winter.

Second, the Governor and legislative leaders define the problem with health care in fundamentally different ways. The administration believes that any health care crisis is confined to a limited number of Vermonters who can’t afford insurance and to the Medicaid program’s deficit. The administration’s answer to the lack of insurance is to subsidize a certain kind of insurance for those who don’t have it now and who fit a certain income category. Their answer to the Medicaid program deficit is to reduce benefits, cut provider payments, and seek more help from the federal government.

In contrast, legislators define the health care crisis as one that affects all Vermonters because the system’s costs are out of control and because, without fundamental restructuring of how we deliver and pay for health care, more Vermonters will lose access to health care. Either they will have no insurance or they will only be able to afford insurance that doesn’t provide access to health care they need when they need it.

Access to health insurance does not assure access to health care . Subsidizing health insurance doesn’t get at the underlying costs of the current system. Cutting Medicaid or reducing payments to providers would be likely to result in less health care provided to low income Vermonters and a greater shift of costs onto those who do have health insurance.

Many Vermonters still have traditional and generous health care insurance. But, more and more Vermonters who had thought their health insurance was a reliable term of their employment or retirement, are finding that is no longer true. More and more Vermonters have experienced the insecurity of going without health insurance or the risk of being in that position. They no longer feel immune to the risks of continuing with the current system of delivering and paying for health care. And even those with “good insurance” understand they are paying more than they should for this complex system.

Vermonters have asked their political leaders to take this challenge head-on and they are willing to listen to proposals for change. They know that doing nothing is not an option any more because the problem is getting worse too fast to permit denial.

A point by point response to the Governor’s veto comments  is provided below. Many of the assertions are simply false or discount the legislature as an independent branch of government that has and will continue to respond to our constituents’ challenge to reform Vermont ’s health care system. Some of the concerns echo our own questions and will form the subject of ongoing analysis.

Legislative committees and the newly formed legislative commission on health care reform will carry out serious work during the summer and fall of 2005 to continue the work to control health care costs and assure that all Vermonters have access to health care. In an effort to include the Douglas administration as an active participant in these discussions we have taken the unusual step of assigning two seats at the legislative health care reform commission’s table to the administration. We are confident Vermonters will appreciate and will fully participate in the discussions and hearings ahead.

 

H.524 - Point by point Response to the Veto Message

 I. Under H.524 state government will not “run” the health care system, and Vermonters will have the same choices of providers and treatments that they have now -- if not more choice. In fact, H.524 offers health care coverage to the 35,000 Vermonters who do not currently have health care insurance or qualify for Medicaid. These Vermonters will now have a choice not currently available to them. H.524 does begin a process of public financing of health care. It increases the fairness (all pay in order for all to be covered) and predictability of revenue. How future expansions of coverage are to be paid for is the subject of careful analysis and future decisions.

II. There is no analysis on which to base the claim that H.524 “would increase premiums for Vermonters with private insurance and hurt providers.” The Commission’s work will include analysis of impact on insurance premiums. Under H.524, reimbursement levels would be subject to negotiation, but initial estimates of program costs assumed that reimbursement would be 50% above current Medicaid rates. In 2003, Vermont Medicaid physician reimbursement was 83% of Medicare , so reimbursement would be about 25% above Medicare. While this figure may be below commercial rates (there is no source of comparison), it would be speculative at best to assume that it would increase the cost shift or decrease provider revenue. First, to the extent that the uninsured are not paying their bills currently, H.524 would reduce, rather than increase costs shifting by reducing bad debt and free care (an issue that is not limited to hospitals). Second, it is not accurate to assume that any reimbursement below “market rates,” however that term is defined, increases cost shifting.

III. As the Governor acknowledges, under the current system, there already is rationing based on ability to pay and available benefit packages offered. Any health care system will involve rationing on some basis. Currently there are people who have no health insurance. To the extent that the uninsured get coverage under H.524 they have greater access and less rationing.

IV. The Governor claims H.524 would hurt local hospitals and reduce jobs. According to BISHCA, Vermont community hospital revenue will grow at an average annual rate of 8% per year from 1999 to 2007. During this same period, gross state product is projected to grow at an average annual rate of 4.5%. When CPI is added in, the projected effect of the cap will be a growth rate of 6.5-7.5% which will link spending with Vermont’s ability to pay, rather than to slash growth rates dramatically from where they are now.

It is unclear how the Governor calculated the 3% cap he projects. It is also unclear how the areas he predicted to be cut were selected. Finally, providing flexibility to the regulatory process does not “acknowledge some of the flaws identified above,” but instead recognized the complexity and unpredictability of the health care system.

Additionally, it is ironic that the Governor would claim that lower hospital revenue could result in job losses and salary freezes for hospital employees in the context of the recent 2006 budget debates where the legislature refused to cut Medicaid reimbursement to providers as dramatically as the administration had proposed in their budget. Clearly, the legislature is committed to the health and effectiveness of Vermont’s local hospitals.

V. There is nothing in H.524 that limits where residents can go for care. Care will be provided in a variety of locales depending on patient needs and where services are offered, just as it is currently.

VI. Current health care spending is unsustainable. Vermont’s health care costs are growing at a rate approaching $1 million per day – this is unsustainable. We cannot continue with the current system. Doing nothing, or just saying no to every proposal that the legislature puts forward is not a sustainable approach to health care reform.

VII. Future success is built on past successes. H.524 is designed to build a system that will carry us into the future in a positive way. Policies of the past include covering Vermont’s children and youth and establishing a coordinated and regulated system of home health care. These are important achievements and have achieved better and more efficient care. The cost of mandates is a small fraction of health insurance premiums and contributes minimally to annual increases.

VIII. The proposed payroll tax is only on companies that are paying less than 3% of their payroll for health insurance premiums – this 3% is much lower than the cost of health insurance for these employees. These are typically companies that do not provide health insurance or that just provide health insurance for a few employees. This payroll tax will help make sure that everyone contributes to health care.

The income tax is much more progressive than health insurance premiums and H.524 will allow people to buy health insurance based on their ability to pay. For example, on a $30,000 income family, the 1% tax on income would be $300, much lower than the cost of insurance for a family of 4 which could be $5,000 to $10,000.

IX. H.524 helps smaller employers by exempting the first $25,000 of payroll from the proposed payroll tax. Additionally, while small employers are “the bulk of firms which do not offer coverage to their employees,” it does not necessarily mean that they have the majority of uninsured employees: large businesses (e.g. Wal-Mart) have more employees and may represent the bulk of uninsured employees. Further, the payroll tax in H.524 is not based on whether the employer offers insurance, but on how much the employer spends (as a percent of payroll). The payroll tax is meant to make sure that all help to pay for health insurance, including “Wal-Mart type” businesses.

Additionally, the size of a company does not determine its profitability – there are some “small businesses” that are extraordinarily profitable and some “large businesses” that have a small profit margin.

The legislature would welcome the opportunity to work with the administration on addressing the goal of taxing free-riders (e.g. Wal-Mart) and help protect homegrown businesses.

X. It is the current health care system that is jeopardizing other state services. For example the cost of health insurance for state and local government employees is escalating and is forcing changes in state and local services. H.524 will help by asking all to pay and thereby reducing the cost shift to those who currently pay.

XI. The legislature had an extraordinarily extensive process that listened to many different points of view including the administration, health care providers, individuals, employers and others. H.524 reflects proposals that were suggested by the business community and others proposed by the administration. The House set up a new committee exclusively devoted to health care. Just in preparing the original House version of the bill the House Health Care committee waded through over 283 documents and heard from over 160 witnesses. H.524 and the 2006 budget include a public engagement process for the fall to make sure that input continues to come in from all Vermonters.

Regarding the provision mandating hospitals to charge uninsured Vermonters the average discount rate: Currently hospitals often charge uninsured Vermonters a very high rate that no insured people pay as insurance companies negotiate lower prices for their beneficiaries. H.524 gives the uninsured the benefit of the same discounts as the insured. Several other states have established similar policies to benefit their uninsured.

XII. Some of H.524’s implementation dates and administrative functions were, in fact, changed in response to the administration’s concerns. However, at some point if we are going to deal with our health care crisis, the executive branch will have to make some changes. The legislature would be open to working with the administration to develop timetables that are more acceptable and also allow change to occur.

XIII. With respect to constitutionally required separation of powers, the actions the Governor complains of are fundamentally legislative in character; they are designed and intended to provide the Legislature with the information it deems it will need in order to legislate intelligently to provide access to health care. This is in accord with the Constitution’s grant to the Legislature of the “powers necessary for the legislature of a free and sovereign state.” (Ch II, §6). The Governor’s criticism, that these actions exceed “traditional”  separation of powers, even if true, is not restrictive. The Vermont Supreme Court has recognized that “there must be a certain amount of overlapping or blending of the powers exercised by the different departments … and that we must construe the constitutional command (separation of powers) consistent with the efficient and effective governmental structures that are able to respond to the complex problems and challenges faced by today’s state government.” (Hunter v. Kitchel, 2004)

XIV. The role of the Executive branch in health care reform, as in any public policy-making, is to inform the debate and to implement the policy selected. The role of the Legislative branch is to be the forum for the debate and to determine the policy. In the 2005 Legislative Session both branches fulfilled their respective roles, and must continue to do so through the 2005 interim and the 2006 session. In order to foster collaboration and communication, the Legislature added two gubernatorial appointees to its Legislative Commission on Health Care Reform. Although it is not unprecedented, it is unusual for a legislative committee to contain members other than legislators. Legislative leadership is hopeful that the legislature and executive branch will develop an increasingly cooperative process in the year ahead.

XV. While administrative savings in H.524 do not approach what might be possible under a single payer system, we believe some savings will be achieved and we hope further work will identify new opportunities for efficiencies.

XVI. Recipients of Green Mountain Health would be entitled to appeal administrative decisions to the seven-member Human Services Board in the same manner and under the same standards and procedures as other individuals who are aggrieved by decisions or policies of the various departments and programs throughout the Agency of Human Services.

XVII. A better definition of “Uninsured”, “Resident” and other terms is needed, and that is why the Legislature has established long range time lines and will commission and conduct several comprehensive studies to, among other things, refine and revise terminology.

XVIII. There are valid concerns with the section concerning negotiated payments and the Legislature would welcome the opportunity to work with the administration on improving it.

XIX. It is true the payroll tax is susceptible to an ERISA challenge. It was drafted, however, with the parameters of ERISA case law in mind. In large measure, the legality of the proposed tax depends on whether it is viewed as a mandate upon employers to offer coverage or, at most, a mere incentive. Because the proposed tax is relatively modest, a legally sound argument can be made that it will not function as a legal mandate on employers and therefore would not be held to be in violation of ERISA. Either way, it should be observed that this is a very unsettled area of law and that the threat of litigation alone should not be a reason to dismiss this financing option.

XX. The legislature chose to make a conservative estimate of revenue from the payroll tax in order to make sure the revenue would cover spending. As more information is available, the legislature will revisit its estimates.

XXI. Like any estimate, it is possible that the estimate of revenue from the income tax surcharge is overstated. However there may also be factors that would moderate the potential overstatement of possible revenue, such as the actual growth of the number of uninsured in Vermont.

The suggestions in items XX and XXI that additional analysis would be beneficial are good ones, and we welcome the administration’s cooperation.

XXII. Monitoring the effect of any new program is a critical role for state government. Health care is no different. The legislature would welcome the opportunity to work with BISHCA to give more specific guidance as to how this monitoring can be done effectively.

XXIII. The administration raised concerns about the pharmaceutical provisions of the bill. H.524 creates a state-wide preferred drug list because pharmaceuticals are the fastest growing sector in health care and will continue to be a critical part of health care spending. As such, we need to work together to help manage these costs.

Regarding drug company rebates, a recent opinion issued by the United States Supreme Court, PhRMA v. Walsh, 538 U.S. 644 (2003) (lifting injunction on Maine Rx), indicates that using Medicaid leverage to extend drug rebates to beneficiaries of other publicly funded programs may not be preempted under the federal Medicaid law, especially if the rebates are being offered to low and moderate income level individuals who do not qualify for Medicaid coverage. Moreover, Maine began implementing Maine Rx Plus in January 2004 and since then, drug companies have voluntarily agreed to participate in the program by offering rebates to additional Maine residents, even though the state has stated its intent not to use its leverage under Medicaid, making the legal preemption challenge moot.

Regarding the PBM section, it is true this section was modeled after the Maine legislation which is the subject of a federal lawsuit. However, on April 13, 2005, a federal district court judge held that the Maine law did not violate ERISA ’s preemption provision.

Zuckerman S, “Changes in Medicaid Physician Fees, 1998-2003, Implications for Physician Participation” Health Affairs, June, 2004.

“Technical Documentation to the Vermont Health Care Expenditure Analysis Forecast: 2003-2007”, December 2004. JFO calculation.

From the legislative website, Speaker of the House”

Adjournment

At three o’clock and Error! No bookmark name given.ten minutes in the afternoonError! No bookmark name given., on motion of Rep. Sunderland of Rutland Town, the House adjourned until tomorrow at one o’clock and fifteen minutes in the afternoonError! No bookmark name given..