MONTPELIER — Vermont has reached a deal with the federal government to move forward with a plan to overhaul the way health care is paid for in Vermont by basing payments to providers on the quality of health outcomes rather than the volume of services they provide, Gov. Peter Shumlin announced Wednesday.
Shumlin, a Democrat whose tenure in office will end in January after three terms, has been seeking the transformational shift in the state’s health care payment system for more than two years. Negotiations with the federal government have resulted in a draft agreement that will now be presented to the public for review before the state and federal government sign off on it.
“We have now a draft agreement from the federal government that will allow us to take on a challenge that I believe effects the pocketbooks of every single Vermonter,” Shumlin told reporters at a news conference Wednesday. “This is probably the single thing that hurts Vermonters the most economically. It’s the unsustainable cost of health care that rises faster than we can … earn the money to pay the bills.”
Under the current health care system, providers are paid for each medical service they provide to a patient. That means doctors are incentivized to order more tests and procedures in order to get paid more. Under the so-called “all-payer” model, health care providers would be paid based on health outcomes and work under a global budget that caps total payments. The system, according to proponents, would be more cost-effective and incentivize providers to perform only medically necessary procedures to achieve a positive outcome.
The all-payer model would be based on the Accountable Care Organization model — groups of doctors, hospitals and other health care providers that come together to provide coordinated care. The concept is intended to provide better information about a patient’s medical history among providers.
The all-payer model would include private insurance as well as government programs like Medicaid and Medicare as payers. The agreement provides waivers available under the federal Affordable Care Act, or Obamacare, to allow it to include those government programs.
Shumlin said the federal government has projected that health care costs will rise by 6.6 percent over the next ten years. Under the all-payer draft agreement, Vermont will look to hold spending in Vermont at or below 3.5 percent for certain elements of the health care industry, saving Vermonters about $10 billion in the next decade.
“I don’t think that any reasonable person would look at these numbers and say, ‘Let’s just keep doing what we’re doing and hope for the best.’ So, I know that this stuff is complicated, but as I’ve said so many times, there is no bigger issue to the prosperity of Vermonters, to our ability to actually do well economically, than bending this cost curve,” Shumlin said.
The draft agreement will cover services provided by Medicare parts A and B, as well as equivalent services available through Medicaid and private insurance. Medicare Part A includes inpatient hospital stays, care at skilled nursing facilities, hospice care and some home health services. Medicare Part B covers certain doctor’s services, outpatient care, medical supplies and preventive services.
The agreement does not include other expensive health care costs such as pharmaceuticals, however.
The 44-page draft agreement will align payments to providers from the three types of payers in the health care industry — Medicare, Medicaid and private insurance. It will not change the benefits federal programs provide Vermonters, however, as opponents have suggested, according to Al Gobeille, chairman of the Green Mountain Care Board, the health care regulatory body in Vermont that has worked with the administration to craft the agreement.
“The answer to that is an unequivocal no. Anything the state would try to do is preempted by federal law. They’re protected in federal law,” he said.
While it does not change what services beneficiaries will receive, it will provide new opportunities for health care providers, officials said. Providers who choose to take part in the all-payer model will be able to enter into a shared savings program that rewards them for limiting the growth in spending. It will also allow providers to set their own quality measures.
“A subject that has come up over and over again by our providers is that they feel tortured by the measures — the way they’re determined, the fact that they have no input. So we as a state have asked for input and authority to basically decide what they are, with the caveat that if we don’t perform on them, the federal government will step in on Medicare and impose their own measures,” Gobeille said. “There is a way to make a capitated payment to a group of providers and then hold them accountable for taking care of that population.”
Providers could also opt out and choose to stay in the existing fee-for-service system. But, a federal law that passed in 2015, the Medicare Access and Children Health Insurance Program Reauthorization Act, or MACRA, will eventually force providers into an alternative payment system, Gobeille said.
The federal law is currently in the rule-making process. Those rules are expected to provide financial incentives to providers that choose an alternative payment model and penalize providers who don’t.
“I cannot, as the chairman of the Green Mountain Care Board, in any way insulate any provider in the state from federal action. So, basically, when I say that it’s volunteer to join an ACO or remain in fee-for-service, I mean remain in fee-for-service in whatever happens to it. But, fee-for-service is changing with Medicare,” Gobeille said.
Shumlin said providers will have choices and can determine what is in their best interest.
“It’s not a question of the agreement that we’ve negotiated or for a provider to continue doing things the way you always have. It’s a question of this agreement or complying by the federal changes that have already been enacted that our coming their way,” Shumlin said. “In other words, their world is changing no matter what happens. The question is what’s the best change for Vermont’s providers and Vermont’s consumers.”
The all-payer agreement amends the state’s Medicaid program, a state-federal program that serves about one-third of the state. An existing “global commitment” waiver from the federal government has been tweaked to allow the state to roll Medicaid into the all-payer model and align the program’s payments to providers with Medicare and private insurance.
“It would be mildly ridiculous to talk about an all-payer model without talking about the Medicaid question,” Gobeille said. “Today, the answer is we have a global commitment waiver from Medicaid that supports the all-payer model.”
Under the waiver, Vermont will receive $55 million over the five-year agreement to help develop alternative payment methods within the program. In total, the state will see an additional $209 million over the five-year period from the federal government. The state will have to contribute some matching funds, however.
“All Medicaid dollars require some state investment as well, and that will be an ongoing process,” said Robin Lunge, Shumlin’s director of health care reform.
Gobeille said the agreement with the federal government requires the state to make several commitments in exchange for additional federal funding and flexibility.
Limiting health care spending in Vermont to an aggregate of 3.5 percent across all payers over the five-year agreement is one commitment. There are no penalties for missing the mark, though, Gobeille said.
“That is a target. It’s not a cap. There is no financial claw-back by the federal government if we don’t do it. There could be corrective action plans and other steps taken, but it is not something that we are on the hook for financially. It is a target or a goal for the state to achieve,” he said.
The state must also bring the spending growth rate in Medicare to 0.1 percent or 0.2 percent below the national average.
A series of health measures the state must improve on are also included in the agreement, including improving the quality of primary care and access to primary care. The state must also reduce suicides and drug overdoses and reduce the prevalence and morbidity of chronic diseases.
Shumlin said his health care goals since taking office in 2011 have been to provide universal coverage to Vermonters, enact a publicly-financed health care system and to provide better health outcomes while lowering the rate of growth in health care spending. The state is now tied for the lowest uninsured rate in the country, but Shumlin’s plan to enact a single-payer health care system was derailed due to its cost. The all-payer model is the state’s best chance to manage the growth in spending, according to Shumlin.
He said his administration and the Green Mountain Care Board will spend the next several weeks explaining to Vermonters what the all-payer agreement means at public hearings and meetings.
“It’s complicated. What I would ask of all of us is that instead of doing what they do in Washington, and quickly jumping to conclusions before we have the facts, that we get to spend some time together understanding what the agreement is and talking about what it means for Vermont before we decide if it’s good or bad,” the governor said.
He pledged to not sign the agreement “if Vermonters come out and say this is terrible for us, we don’t think this is a good idea.” And he said providers will ultimately be able to determine if they want to participate.
“Any provider — doctor, nurse, chiropractor, mental health counselor, any person doing business in Vermont in the health care industry right now — that does not want to join this effort doesn’t have to,” he said. “They can choose to stay with the current fee-for-service system that we have in place.”
Meanwhile, should the agreement take effect and officials determine later that it is no longer in the state’s interest to continue, the agreement can be terminated by either side at any point with a 180 day notice. The state “intentionally put in exits,” he said.
“If a governor or the next president were to decide that this is a terrible idea, with a notification period, they could end the agreement,” Shumlin said. “If someone came up with a better idea, they can negotiate that with the feds and remove themselves from this agreement.”
The Green Mountain Care Board, whose five members will still need to approve the agreement, will hold public hearings on Sept. 29, Oct. 5 and Oct. 13. The Shumlin administration is planning to hold public forums on Oct. 2 in White River Junction, Oct. 6 in Chittenden County and Oct. 11 in Rutland County.
Both Shumlin and Gobeille pushed back when questioned whether they were providing Vermonters with enough time to digest the agreement.
“I don’t think it’s like a gubernatorial race or a senate election where it needs a year,” Gobeille said. “The point being, the provider community is going to have a tremendous amount to say about this. I think that will happen very quickly.”
“If this was an agreement that no one could alter, I would be sympathetic to your concern,” Shumlin said.
House Minority Leader Don Turner said Wednesday he remains skeptical of the all-payer model concept, saying it “raises numerous technical, legal, and ethical questions.”
“I am deeply concerned by Gov. Shumlin’s hasty efforts to institute an unproven and complicated system months before he leaves office. By seeking to preserve his legacy rather than the best interests of Vermonters, I believe that he is setting up the state for failure – once again,” the Milton Republican said.
Turner said the agreement is being rushed as Shumlin’s time in office winds down.
“Meaningful health care reform is built on the foundation of informed deliberations that include both expert opinions and civic participation. Neglecting the latter places Vermonters in harm’s way. Therefore, I cannot condone Gov. Shumlin’s rushed attempt to memorialize his tenure by turning our state into a laboratory for healthcare experiments yet again,” he said.
Read the draft agreement below: