Vermont's New Health Payment System Gets Tentative Federal Approval

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By Adrianne Appel

Sept. 29 — Vermont is in line to be the first state in the nation to operate an all-payer health system after receiving tentative federal approval.

Under the draft plan, expected to start Jan. 1, 2017, Medicare, Medicaid and private insurers would each pay large groups of doctors and hospitals one large fee for providing care to all of their patients. The state would set annual limits on health-care spending, which together with the all-payer system, would save the state $10 billion over 10 years, Gov. Peter Shumlin (D) has said.

The state is seeking public comments on the plan and will then request final approval from the federal Centers for Medicare & Medicaid Services before implementing it, Robin Lunge, Vermont director of Health Care Reform, told Bloomberg BNA Sept. 29 in an interview.

The Vermont all-payer system would reflect a CMS goal of promoting the use of payment systems other than fee-for-service. The CMS and Vermont believe they can save money and improve the quality and coordination of care by switching to an all-payer system.

State Needs Reform

“The all-care model provides Vermont with the opportunity to move forward with provider-led reform in a way that really addresses the needs of our state,” Lunge said.

The draft plan will be made final after it is signed by the state and the CMS. The plan would operate from Jan. 1, 2017, through Dec. 31, 2022. Before signing, the state must first seek public comments on the draft plan through October, Lunge said.

“We’ve been working with the federal government on this agreement for a while,” Lunge said. “They are certainly comfortable with us releasing this draft.” The state released a preliminary draft plan, called a term sheet, in January 2016. The current draft plan is based on input from the CMS and Vermonters, Lunge said.

Based on ACOs

The plan would be based on accountable care organizations: large groups of doctors, hospitals and allied health providers. Providers wouldn't be paid a fee-for-service but rather a periodic fee based on health outcomes of patients. Medicare, Medicaid and commercial insurers would negotiate monthly or other regular payments with the ACOs.

The state hopes that eventually nearly all providers in the state will be part of an ACO and part of the state’s all-payer system. The state wants to phase out fee-for-service payments, which are an inefficient and costly way of providing care, according to the Vermont office of Health Care Reform.

Two ACOs in Vermont

There are two accountable care organizations in Vermont, OneCare Vermont, which includes two major hospitals and 30 percent of doctors and allied health providers in the state, and Vermont Care Organization.

The state’s goal is that 30 percent of providers will be using the all-payer system by 2018 and that 80 percent will be in it by 2023.

The ACOs would be overseen by the Green Mountain Care Board, the state’s health and finance agency.

Vermont's plan is in line with a goal announced in early 2015 by the federal government to move the Medicare program, and the health-care system at large, toward paying providers based on the quality, rather than the quantity, of care they provide (17 HCDR, 1/27/15).

Maryland's Model

Another state has a limited version of all-payer health care. Maryland has relied on an all-payer system for its hospitals since the 1970s.

An independent state board sets rates for hospital services, and all public and private payers pay those rates.

Cap on Cost Growth

The state would impose a 3.5 percent annual cap on growth in health costs paid by Medicaid and private insurers starting in 2018.

Also under the plan, Vermont will trim Medicare cost growth. The plan calls for limiting total cost of care per beneficiary to at least 0.2 percentage points less than “Projected National Medicare Total Cost of Care per Beneficiary Growth,” the plan said.

Health-care spending in Vermont grew 4.6 percent in 2014—the most recent year for which data are available, according to the Vermont office of Health Care Reform.

New Governor in 2017

Shumlin is in his final months of office, introducing some uncertainty as to the plan’s future. Both candidates for governor, Sue Minter (D) and Lt. Gov. Phil Scott (R), “have expressed an open mind to reviewing the details of the agreement,” Lunge said. The plan does include a termination clause, which would allow the state to end its all-payer agreement with the CMS with 180 days notice, Lunge said.

To contact the reporter on this story: Adrianne Appel in Boston at

To contact the editor responsible for this story: Brian Broderick at

For More Information

More information about Vermont's plan is at

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