Commentary: All Payer and the One Big Provider (October, 2016)

by John McClaughry John McClaughry

Last week outgoing Gov. Peter Shumlin made public the draft agreement he made with the Federal government’s Center for Medicare and Medicaid Services (CMS). Its goal is to dramatically change the way health care services are paid for in Vermont. And of course, if the method of payment is dramatically changed, there will be major changes in who provides the services, to whom, when, and where.

The new All Payer Model is different from the Single Payer model enacted in 2011, but there are some troubling similarities.

Single Payer proposed to put almost all Vermonters into a government-controlled universal health care program. Health insurance carriers would be put out of business. Vermonters would receive “free” care at the point of service, as in Quebec.

The appointed Green Mountain Care Board would receive and disburse most health care spending. With that enormous power plus strong regulatory authority, the Board would instruct all hospitals, nursing homes, doctors, dentists and other providers to efficiently provide “appropriate care at the appropriate time in the appropriate setting.”

This Single Payer plan was to be financed by combining $5 billion of Medicaid funds, Medicare payment flows, the lump sum of ObamaCare premium credits, and new taxes on Vermonters to make up for the disappeared private insurance premiums.

It took Shumlin three years to figure out that the new taxes would have to be heavy enough to bring in at least $2 billion a year from Vermont taxpayers, a sum a third larger than the state’s current General Fund budget. In December 2014 he scrapped that plan as politically impossible.

Shumlin and his Board then set out to contrive a different Model, called All Payer. Under this plan, private insurers would continue to exist, collect premiums, and pay provider claims, as would Medicaid and Medicare. The CMS would inject $209 million in new money. But unlike Single Payer, where the Board would sit atop the payment pipeline, under All Payer the three payers would make payments directly to the providers – or, rather, to the One Big Provider.

The One Big Provider is the Accountable Care Organization (ACO), already in formation. Eventually the ACO would take in all the money from the three payers and use it to provide patients with “appropriate care at the appropriate time in the appropriate setting.”

At first, patients and doctors could opt out of the One Big Provider, but the goal is to pressure them to take their place within the giant health care monopoly. The three principal payers (Medicaid, Medicare, and commercial) would pre-pay the ACO for (supposedly) keeping the patients “aligned” with it healthy for the year.

Why are we doing all this? The first powerful reason – never stated in the handouts and slide shows – is this: by creating a monopoly comprised of almost all of the providers, coupled with a government board that has full regulatory control over the three payers, All Payer is a giant step toward resurrecting Single Payer. Instead of collecting the payments and disbursing them to the monopoly One Big Provider, the Board will control Medicaid and tell the other two payers – Medicare and commercial insurance – how much to pay, and for what.

The role of the ACO, the One Big Provider, is to figure out how to provide care that meets the Board’s quality standards, without incurring penalties for overspending.  Spending in excess of 115% of the ACO’s budget will however enjoy “stop loss” protection funded by taxpayers and premium payers.

The urgent argument for All Payer is to reduce the health care spending curve from a projected 6% to a 3.5% increase per year. It is also to replace traditional “fee for service” medicine with “payment for value”, although discerning just what constitutes “value” is very challenging.

The ACO will become the care rationing mechanism once removed from the government itself. As in Quebec Single Payer, the ACO will always have its global budget in mind when it faces expensive decisions – perhaps about you.

Hamilton Davis, the veteran health care journalist and Single Payer advocate, remarked a year ago that “A [non-integrated] system of 14 hospitals and thousands of doctors spending somewhere north of $3 billion each year is hideously complex. How can the Board manage such a thing? The Board can’t possibly do that.” Neither can the ACO Board.

As All Payer’s monopoly ACO struggles to restrict spending by providers it doesn’t own, it will enlist the government’s Board to enforce its decisions. All Payer will steadily come to resemble Single Payer, of unhappy memory.

John McClaughry is vice president of the Ethan Allen Institute (

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