Commentary: Vermont’s Coming All Payer “Reform” (October, 2015)

by John McClaughryJohn McClaughry

Hamilton Davis is a veteran Vermont reporter who has participated in health policy debates since his days as the advisor to Gov. Madeleine Kunin thirty years ago. He is now the health reporter for Vermont Digger, where he recently published a lucid description of Vermont’s likely health care future.

Davis’s account is candid about some of the mistakes made during the Shumlin years. He acknowledges the embarrassing failure of the health insurance exchange, Vermont Health Connect, and especially “the devastating collapse” of Gov. Shumlin’s four-year effort to install single payer health care.

That collapse, to Davis, “dealt a powerful blow to health care reform.” However, as a long-time advocate for government-run health care, he remains hopeful about the further prospects for “reform”.

Davis says there are two main aspects of “reform”. One is shifting the non-governmental half of total health care expenditures from individuals and private insurance to the taxpayers. That requires raising over $2 billion a year in some combination of new taxes. That politically impossible “reform” defeated Shumlin’s grand single  payer plan.

The other main aspect of “reform”, he says, is “cost containment”, something that Shumlin has declared every year since he began his crusade. The goal of “cost containment” is said to be holding health expenditure increases to 3.5% a year.

Davis applauds the Green Mountain Care Board for reducing the rate of cost increases in the hospital system. How did the Board achieve this?  By flexing its regulatory power to cap hospital spending. This brute-force technique for “cost containment” can mandate any desired level of spending – but somewhere the hospital must cut back on patients, services, doctors, nurses, labs, medications, technology, length of stay, amenities and other cost drivers.

In Quebec, which has a similar regulatory regime, the regulatory body (RAMQ) contains costs by limiting the number of doctors, allowing non-doctors to perform more services, limiting the gross revenues of independent practices, reducing available hospital beds, skimping on technology, and above all, making expensive patients wait for treatment, sometimes for more than a year. If patients die while waiting for treatment (as happens in the single payer VA system here), that makes it easier to stay within the government-mandated budget cap.

The major “reform” now under way, Davis says, is “shifting from fee-for-service reimbursement to some sort of block payments to a group of providers to take care of a group of patients.”  The buzzword, Davis says, is “capitation”.

Now here’s the plan. The providers – all the hospitals and most of the clinics and practices – will be pushed into an Accountable Care Organization (ACO). Its management will be responsible for somehow getting all the providers to jointly meet the government-approved health care needs of a defined population.

Instead of the several payers (Blue Cross, MVP, Medicaid, Medicare, self-insured companies, etc.) paying for each of thousands of specific patient services, all the moneys of the various payers will be funneled through the Green Mountain Care Board. Since the Board sits astride all the money flow, it has complete regulatory power over premiums, rates, facilities, services, and practices.

Ever mindful of the need to “contain costs”, the Board will decide how many dollars per covered person it will give the ACO annually (“capitation”). The ACO management then somehow decides how to apportion the available money among the providers to meet what the ACO determines to be the legitimate medical needs of all the patients.

In short, the Board that controls all of the money flow will force the ACO to ration care so that it stays within the Board-imposed global budget. The rationing is thus once removed from the government Board that imposes the global budget. The Board likes that.

Davis, who enthusiastically favors a “One Big ACO” model for Vermont, candidly observes, “A [not 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.” But Davis believes the ACO can magically manage it, backed up by the coercive power of the Board as needed.

The Shumlin Administration went to Washington last week to see if it can wangle a waiver to get its hands on the flow of Medicare funds for Vermont seniors. If it succeeds, we can look forward to one mighty Health Care Authority that controls all providers, specifies all medical services, sets all rates, and consumes unimaginable amounts of tax and premium dollars.

We are the designated financiers – and guinea pigs – of this coming “reform”.

- John McClaughry is the founder and vice president of the Ethan Allen Institute

{ 2 comments… read them below or add one }

Ken September 30, 2015 at 2:24 am

PLEASE leave the Medicare alone.. We ALL worked for this benefit HANDS OFF ….

Reply

John Richard October 1, 2015 at 12:50 pm

A conclusion many must be making, leaving Vermont is the best way to stop this madness…at least on a personal level.

Reply

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