Highlight on Vermont: New all-payer model grows out of state Medicaid budget crisis

For months, Vermont has been struggling with how to pay for its Medicaid program as reported costs have far outstretched allotted budgets. Instead of reducing benefits for all of the newly insured enrollees in Vermont’s health care programs, Governor Peter Shumlin announced a new payment system entirely, one that he claims will transform its health care system from one that rewards fee-for-service, quantity-driven care to one that rewards quality-based care that focuses on keeping Vermonters healthy.

All payer model. This new all-payer model is described by Shumlin as an agreement between the state and CMS that enables the three main payers of health care in Vermont–Medicaid, Medicare, and commercial insurance—to pay for health care differently than the traditional fee-for-service reimbursement. In an all-payer model, Vermonters will continue to have the same choice of providers as they have today under Medicare, Medicaid, and commercial insurance. Benefits will not be reduced and by changing the payment structure, Medicare beneficiaries may have access to, and coverage for, new services not currently covered by Medicare.

In Vermont’s proposal, the all-payer model will require commercial insurers and Medicaid to pay the same way Medicare will be paying for health care under its Next Generation program. All involved payers will approach health care payment to accountable care organizations in a common way and all payers will provide doctors and other health care professionals the flexibility they need to lead health care delivery change. Maintaining the same set of rules, standards, and methods of payment across payers will drive efficiencies in the system. The all-payer model builds off current federal and state health care reform efforts that have value-based payment components.

Outlined to the public on January 25, 2016, Shumlin and the Green Mountain Care Board released an outline or term sheet detailing the new all-payer system. The state is focusing on three main health goals: increasing access to primary care, reducing the prevalence of chronic diseases, and addressing the substance abuse crisis. The term sheet lays out plans to curb expenses by setting a 3.5 percent spending target and 4.3 percent spending cap, with a commitment that “Medicare will grow more slowly in Vermont than nationally.” These financial targets, the term sheet notes, are based on health care services in Vermont’s Medicare, commercial, and Medicaid shared savings programs today, mostly hospital and physician services.

“From Day 1, reforming the way doctors and other medical providers are paid has been a priority of my administration,” Gov. Shumlin said. “This is the only way we will curb the rising cost of health care that gobbles up money faster than Vermonters can make it. Today is the beginning of the rubber hitting the road on cost containment. Our success will mean better health outcomes for Vermonters and the end to health care costs rising faster than our economic growth.”

Investments in infrastructure. To curb spending, Vermont is planning to incorporate old and new ways of making health care more affordable. By investing in the state’s current infrastructure, Shumlin plans to expand the Services and Supports at Home (SASH) program, which already has a track record of saving money while keeping seniors in their home and out of hospitals. Another program Vermont intends to continue with is Medicare participation in the Blueprint for Health, Vermont’s nationally recognized initiative transforming primary care, which has also already demonstrated success. The state also proposes to add Medicare participation in the Hub and Spoke opiate addiction treatment program.

The state is currently in the process of finalizing negotiations of the terms of the all-payer model with the federal government. The information and terms released by Vermont do not represent the final state plan.