Health care costs in Vermont are growing unsustainably. Many Vermont households, including those eligible for Obamacare subsidies, will pay $500 to $1,000 more for health coverage in 2017 than in 2016.
Blue Cross Blue Shield has announced rate increases of between 5 and 8 percent for 2017, along with across-the-board increases in deductibles, co-payments and out-of-pocket maximums. Self-insured businesses face similar cost increases for their health benefit programs. Medicaid continues to grow as a share of the state budget.
There are many explanations for these increases in health care costs — among them an aging population, increased utilization of health care services, and new procedures and pharmaceuticals that cost more than the ones they replace.
Gov. Shumlin and Al Gobeille, the chair of the Green Mountain Care Board, believe that a response to these increases is an “all payer” system that would work in conjunction with an “Accountable Care Organization” (ACO). Under this approach, health care providers would be encouraged to join an ACO that would receive payments on a per-patient basis from all of Vermont’s health care payers — private insurance, Medicare and Medicaid.
This system would replace the current fee-for-service model of paying for health care. The providers in the ACO would have an incentive to keep their patients healthy, since they would be paid on a per-patient basis. They could not increase their income by performing more services; instead they would be motivated to keep their patients out of the hospital through delivering more preventive care.
Shumlin, Gobeille and other officials have concluded a draft All-Payer/ACO agreement with federal health regulators. Shumlin very much wants to sign a final version of it before he leaves office in early January.
The Green Mountain Care Board has been holding public meetings about the agreement throughout the state over the past several weeks. The response to the agreement, from both provider organizations and individual Vermonters, has been mixed. While many of the speakers at the meetings agreed with the concept of an all-payer ACO, they had many questions about the details of the implementation.
On both substantive and political grounds, Vermont officials should consider deferring final approval of the agreement until the new governor and the Legislature have had a chance to review it. This would also give both provider and patient advocacy organizations the opportunity to obtain detailed answers to their questions on the draft agreement.
The academic literature presents a mixed verdict on the success of ACOs in holding down medical costs. While they have had such an effect with smaller populations, there are few examples of an all-payer model’s being combined with an ACO in a group as large as the entire state of Vermont.
Some of the literature finds that the most successful ACOs have been those that are organized and managed by primary care physicians. The model that is being promoted by the Green Mountain Care Board, along with existing trends in health care consolidation in Vermont, would result in the UVM Medical Center, and Dartmouth-Hitchcock Medical Center, playing large roles in organizing and coordinating care. Can teaching hospital-based organizations deliver primary care more effectively and less expensively than independent physician practices?
The all-payer/ACO model, if adopted, could well help to slow the rate of increase of health care costs in Vermont, and lead to more coordinated care. However, with Shumlin’s term ending soon, the public would have more confidence in a new system if it were vetted and endorsed by a newly elected governor, whose appointees could also provide another set of eyes to assess, and possibly revise, the plans. The program should also be reviewed by the Legislature, which needs to appropriate much of the public funding that will support it.
Eric L. Davis is professor emeritus of political science at Middlebury College.