Earlier this week, the federal government delivered some bad news for Gov. Shumlin’s health care plan: the Centers for Medicaid and Medicare decided not to provide matching funds for the Gov’s plan to fund health-insurance subsidies for low-income Vermonters.

(The subsidies were needed in order to minimize the transition from VHAP/Catamount to the new health care exchange, which would have hit many Vermonters pretty hard.)

Shumlin had budgeted $10.3 million to cushion the blow of rising premiums and out-of-pocket costs, including a 20% federal match. Well, that 20% ain’t coming.

And Shumlin’s response, you’ll never guess. He’s cutting the subsidy program from $10.3M to $7M. (Yes, I know that’s more than a 20% cut, and I don’t know why. I’m just reporting what I read on VTDigger, which is the first with this story.)

Those with no patience for details can skip this para: Shumlin had asked CMS to fund 55% of two subsidy programs. CMS decided not to fund the program aimed at people earning 300-350% of the federal poverty line; it was willing to fund the program aimed at those earning up to 300% of the FPL. The CMS decision meant a loss of $2.1M in federal dollars.

Because the worst thing we could possibly do, y’know, is raise taxes. Health Access Commissioner Mark Larson:

“Without the federal funds that we had requested, we simply can’t support the gross expenditure within the general fund dollars we have available,” he said.

The operative phrase being “within the general fund dollars we have available.”  

The revised proposal will hurt the people in the 300-350% range, who will not get any cost-sharing subsidies. In addition, subsidies for those in the 200-300% range will be cut by $300-500.

In real dollars, that 200-300% range is $23,000-34,500 in annual income. $500 is a lot of money for these people. Especially when many of them would also see a cut in the Earned Income Tax Credit thanks to a separate Shumlin proposal.

Larson expressed a willingness to work with the Legislature on ways to improve the revised proposal — but with the constant caveat, “with the general fund dollars we have available.” In other words, forget any notion of raising revenue; Governor Shumlin wants it all to be borne by the working poor. Who, I guess, have more money to spare than the wealthy.

There are two big problems with this. Beyond the obvious, I mean. First, the more expensive the coverage is, the more people will simply go uninsured. Which kinda defeats the goal of health care reform, doesn’t it, now?

And second, according to Peter Sterling of the Vermont Campaign for Health Care Security, “If we don’t get this right out of the gate, we’ll be stuck.” That observation arises from his experience advocating for the Catamount program several years ago. After the Catamount startup, he spent a lot of time lobbying for improvements in the program, to little avail. He fears the same thing will happen once the health care exchange is up and running. And that’s why he wants to get it right the first time around.