Vermont Wants Federal OK for Its ‘All Payer’ Health Care Proposal

As health care costs continue to pressure Vermont’s finances, Gov. Peter Shumlin’s office on Monday released new details on a proposal the Green Mountain State has submitted to the federal government, seeking to alter the way doctors and hospitals there are paid for providing care to patients.

Vermont officials want the federal Centers for Medicare and Medicaid Services to approve the state’s plans for a so-called “all-payer” health care model. Adopting the all-payer system would mean moving away from “fee-for-service” reimbursements, where health care providers are paid for each procedure or test they administer.

According to the governor’s office, payments under the all-payer model would instead be geared to incentivize keeping patients healthy. The model would cover health care payments made through Medicaid, Medicare and those made by private insurance companies.

“This is the only way we will curb the rising cost of health care that gobbles up money faster than Vermonters can make it,” Shumlin, a third-term Democrat, said in a statement on Monday. “Our success will mean better health outcomes,” he added, “and the end to health care costs rising faster than our economic growth.”

The state’s proposal calls for limiting maximum allowable spending growth on health care statewide to 4.3 percent for the next five years.

Discussions about implementing the all-payer model in Vermont have gone on for about a year now.

Currently, Maryland operates an all-payer hospital rate regulation system, which is the only one of its kind in the U.S., according to the Centers for Medicare and Medicaid Services.

Vermont’s all-payer plan is meant to align the way payments are made to health care providers from insurance companies, Medicaid and Medicare, according to the materials released Monday. Doing so, officials say, will help eliminate inefficiencies that stem from the different rules, standards and payment methods now found across those three types of “payers.”

Under the proposed system, Vermont residents would have the same choice of providers as they have now under Medicare, Medicaid and commercial insurance plans, and benefits would not be reduced, according to the information the governor’s office distributed.

The regulatory system for rate and payment rules would be hammered out during a public process, which would unfold if the federal government allows the state to proceed with its plan.

How exactly the new structure for rates and payments would work is still uncertain. But establishing and administering it would involve what are known as “accountable care organizations,” which are groups made up of doctors, hospitals and other health care providers.

“There are a number of different ways it could work,” Robin Lunge, Vermont's director of health care reform, said by phone on Monday, referring to the rate and payment structure.

She went on to describe the all-payer model as: “a fundamental shift in the financial mechanisms around healthcare, at the provider level.”

Al Gobeille chairs the Green Mountain Care Board, which was created by the state Legislature in 2011 and is comprised of members nominated by a committee, who are then appointed by the governor. Some of the board’s responsibilities include regulating Vermont’s health insurance rates, and testing new ways to pay for and deliver health care.

During a phone interview on Monday, Gobeille explained how the all-payer system stands to change Vermont's health care system.

“Medicare and Medicaid and Blue Cross, for example, are all payers, even if they are the government, they are still a payer,” he said. “They have payment rules and they have operational rules that they enforce on providers, and all of those rules don’t always lead to the best health outcomes. We want to be able to allow an accountable care organization, comprised of providers, to decide what those rules should be. And then, forgetting all the different payers, allow that group of providers to take care of the health of a population.”

By doing this, he added, providers would be freed “from the confines, and overly prescriptive silos that the payers create.”

Offering an example of how payments under an all-payer system could look, Gobeille said primary care doctors and nurse practitioners might get 80 percent of their payments from a “panel management fee” that covers a group of their patients. Additionally, they might be eligible for up to 20 percent more money for services that aren’t included in the bundle of services that falls under the fee.

“The doctor needs to say, or the nurse practitioner needs to say, ‘how do I want to see my patients?'” Gobeille added.

He stressed that the state wants providers to have a big role in how the inner workings of an all-payer model would take shape. “We’re really relying on providers to lead this change,” he said.

The Vermont Association of Hospitals and Health Systems has not yet taken an official position on the details of the all-payer proposal that were released on Monday, Annie Mackin, a spokesperson for the group said in an email. She added that, in the coming weeks, the group would evaluate the information.

Nobody was available on Monday to comment on the proposal at The Vermont Medical Society, an organization that represents the state’s physicians.

In recent years, Medicaid has been a key driver of health care costs for Vermont’s state budget.

Of the state’s roughly 620,000 residents, the governor said during his budget address last week that more than 200,000 are on some form of the Medicaid program, which provides health care coverage for those with low incomes. Enrollment grew after the Affordable Care Act went into effect nationwide. Shumlin noted that the Affordable Care Act has helped Vermont achieve “near universal” health care coverage for state residents. But higher Medicaid enrollment has also contributed to a $55 million state budget shortfall for the program.

“Some will claim that we should stick with the system we have because change is scary,” the governor said as he made the case for an all payer system during his budget address, according to a transcript of the speech.

But, he continued: “We can’t. Under the fee-for-service system we have now we spend more on health care than anyone else in the world, and our outcomes are not as good.”