Editor’s note: This commentary is by Tom Pelham, who is a member of the Green Mountain Care Board. He was formerly finance commissioner in the Dean administration, tax commissioner in the Douglas administration, a state representative elected as an independent and who served on the Appropriations Committee.
Let’s start from the top. Vermont’s health care spending is among the highest in the world.
For 2018, the Organisation for Economic Co-operation and Development’s profile of per capita health expenditures among democratic countries had the United States highest at $10,586, with Germany second at $5,986. The federal Centers for Medicare and Medicaid Services places Vermont’s expenditure per capita at fourth highest among the 50 states.
If Vermont’s spending per capita equaled New Hampshire’s or Maine’s (ranked eighth and 10th respectively), savings to Vermont’s health care system would have been $376.4 million and $412.7 million respectively. Further, Vermont’s spending growth rate has been dramatic, at 11.8% of gross state product in 1995, rising to 18.5% in 2017.
For over 30 years, Vermont’s leaders have pursued an elusive path to lower costs, increase access and sustain a high-quality health care system. This pursuit encompassed both practical and ideological struggles, including community rated insurance; market-based versus government-run single payer solutions; incremental expansions of Medicaid via Dr. Dynasaur, VHAP and Catamount insurance programs, among others. The links below profile just a few of the underlying stresses Vermont’s health care system experienced over recent decades:
- Ethan Allen Institute Report: Reviving Health Insurance in Vermont
- Graff: Peter Shumlin’s not done yet, but maybe single payer should be (Vermont Business Magazine)
- Vermont Health Connect: Reform Goals
Today, somewhere between the collective approach and the free market resides One Care, Vermont’s accountable care organization. ACOs, or accountable care organizations, are a product of the federal Affordable Care Act. CMS describes ACOs this way:
“ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program.”
In Vermont, state leaders sought to expand the ACO concept beyond just Medicare, resulting in the all-payer model agreement between the CMS and the state that included Medicaid and commercial payers along with Medicare. It’s important to understand the all-payer model is established “to test innovative payment and service delivery models” over a five-year period, 2017-2022. The all-payer model does not guarantee OneCare’s existence nor CMS’s participation beyond the “test” period.
Two nonprofit hospitals serving Vermonters, the University of Vermont Medical Center and Dartmouth-Hitchcock Medical Center, organized the “provider driven” ACO OneCare. OneCare’s 20-member board of directors is comprised of administrators of six hospitals, two independent primary care practices, local human services organizations, Medicare and Medicaid beneficiaries, a Vermont Foodbank representative, among others.
OneCare is technically organized as a “for-profit” organization since Medicare requires at least 75% control of an ACO’s governing body be ACO participants. CMS adopted this requirement to “ensure that ACOs remain provider-driven,” rather than driven by management companies or health plans, for example. This federal requirement conflicts with a Vermont statute that no more than 49% of those serving on the board of any public benefit (nonprofit) corporation be financially interested persons; thus, mandating OneCare technically be a for-profit entity. The Scott administration, with OneCare’s concurrence, is seeking options that remedy this conflict, giving OneCare nonprofit status.
OneCare is gaining momentum. Though provider and payer participation is purely voluntary, the alignment of Vermont’s health care organizations with OneCare is growing to include: 13 of 14 hospitals; nine of 12 Federally Qualified Health Centers; 267 primary care practices; 25 specialists practices; nine of nine home health and hospices; 27 of 38 skilled nursing facilities; 10 of 16 designated agencies; among others, along with payers Medicare, Medicaid, Blue Cross Blue Shield and MVP. These organizations represent countless Vermonters serving on local, regional and statewide oversight boards who find value in the mission of OneCare as profiled in these two WCAX presentations.
On a fiscal basis, OneCare participants are, also voluntarily, realigning their existing budgets with OneCare’s fiscal infrastructure in the amounts of $12.9 million in 2017; $634.3 million in 2018; $881.9 million in 2019; and $1.42 billion budgeted in 2020. For 2020, 95.6% of the budget will go directly to pay patient claims with only 1.35% dedicated to administrative expenses. The remaining 3.05% is for investments in programs such as complex care coordination, a recognition that 60% of Vermont’s health care spending is consumed by just 16% of high-risk patients. And the outdated and costly fee-for-service claims payment system is incrementally being supplanted by a fixed prospective payments approach.
Criticism of OneCare has emerged. Not surprisingly, neither those unalterably committed to a single-payer government program or a free market unregulated system are satisfied, as OneCare is neither. Stories about a whistleblower’s unsubstantiated claims over data analysis and another about minor findings by the state auditor of poor documentation by OneCare subrecipients have caught the media’s eye.
As OneCare emerges, it is important that both the strategic and tactical outcomes of OneCare be transparent. As noted earlier, health care in Vermont is among the most expensive in the world, burdening both taxpayers and ratepayers. If OneCare can be a catalyst for meaningful and long-term reductions in health care costs through systemwide operational and payment efficiencies and helping Vermonters choose preventive health and wellness over remedial and acute care interventions, then thousands of Vermonters benefit, as does Vermont’s economy.
As important as, if not more than, OneCare are major structural imbalances in Vermont’s health care financing landscape. Three stand out: the cost shift, payer mix, and the premium/cost sharing cliff.
The cost shift occurs when government-set prices paid to health care providers by Medicaid and Medicare don’t cover the cost of such services. These underpayments result in health care providers charging non-governmental payers more than the cost of services in order to stay financially afloat. Non-governmental payers include those who pay commercial insurers or providers directly through premiums, deductibles, co-payments, and co-insurance.
The cost shift is not equally distributed, affecting some providers more harshly than others. In general, the key variable, called the “payer mix,” is driven by the ratio of non-governmental payers to governmental payers in a provider’s service area. Where the “payer mix” is more heavily weighted by Medicaid and Medicare members, providers have less flexibility to “cost shift” losses on to claims paid for or by non-governmental payers. For example, the 2020 hospital budget revenues from commercial payers range widely; from 62.7% for the University of Vermont Medical Center to as low 30.9%, 41.3% and 52.3% for Grace Cottage, Mt. Ascutney and Northeastern Regional hospitals respectively.
And then there’s the premium cliff. Many Vermonters receive help in paying for health care benefits through Medicare, Medicaid, employers and governmental tax credit programs. But, above 400% of the federal poverty level government subsidies do not exist. This means, for example, that a household of two in 2019 with an income just under 400% of the federal poverty level, or $65,840, paid a monthly premium of $150 or 2.7% of their income for a bronze insurance plan purchased via Vermont Health Connect. For the same household at just over 400% of FPL, the monthly premium was $852 per month or 13.8% of income along with hefty co-pays and deductibles. A steep cliff indeed.
Structural imbalances like the cost shift, payer mix and premium cliff in our health care financing system need the attention of the media, the auditor, the Green Mountain Care Board and elected leaders just as does OneCare.