Vermont’s ACO Model: A unified payment structure focusing on health outcomes

The trial of an alternative payment model designed to incentivize “health care value and quality, with a focus on health outcomes, under the same payment structure for the majority of” Vermont health care providers throughout the state, including Medicare, Medicaid, and commercial health care payers, will begin on January 1, 2017, and end on December 31, 2022. According to CMS, the goal of this payment model, known as the Vermont All-Payer Accountable Care Organization (ACO) Model, is “to deliver meaningful improvements in the health of a state’s population by transforming the relationships between and amongst care delivery and public health systems across Vermont” (see HHS delivers on alternative payment model promises ahead of schedule, Health Law Daily, March 4, 2016). The Vermont All-Payer ACO Model builds on the Maryland All-Payer Model by bringing statewide health care transformation beyond the hospital (All-payer system helps Maryland keep cost growth below federal level, Health Law Daily, July 22, 2016).

The Vermont ACO model will be in effect for six performance years (PY0-PY5), each spanning a full calendar year. CMS will provide start-up funding of $9.5 million in 2017 to support care coordination and collaboration between practices and community-based providers. Vermont will be accountable for statewide health outcomes, financial, and ACO scale targets across health care payers. CMS also approved a five-year extension of Vermont’s section 1115(a) Medicaid demonstration, which enables Medicaid to be a full partner in the Vermont All-Payer ACO Model.

According to CMS, “the Vermont Medicare ACO Initiative is considered a Medicare Advanced Alternative Payment Model for the providers in the two-sided risk Medicare ACO portion of the model within CMS’ Quality Payment Program, and physicians and other clinicians participating in the Vermont Medicare ACO Initiative may potentially qualify for the Advanced Alternative Payment Model bonus payments starting in performance year 2018.”


Vermont’s statewide targets include ACO scale targets, all-payer and Medicare financial target, and health care and quality of care targets.

Although ACOs will continue payer-specific benchmarks and financial settlement calculations, the ACO design will be aligned across payers. Vermont payers and providers will be encouraged to participate in ACO programs with a goal of attaining 70 percent of all residents, including 90 percent of Vermont Medicare beneficiaries, participating in an ACO. Vermont’s ACO Model will help CMS attain itsgoal of “having 50 percent of all Medicare fee-for-service payments made via alternative payment models by 2018” (see New alternative payment models announced by CMS, Health Law Daily, October 26, 2016).

In terms of the financial target, Vermont will limit the annualized per capita health care expenditure growth for all major payers to 3.5 percent and the Medicare per capita health care expenditure growth for Vermont Medicare beneficiaries to at least 0.1-0.2 percentage points below that of projected national Medicare growth.

Vermont identified four priorities for its Health Outcomes and Quality of Care target: substance use disorder, suicides, chronic conditions, and access to care. Each of the priorities will be measured in three categories: (1) population-level health outcomes regardless of whether the population seeks care at the providers in the ACO; (2) health care delivery system measures and targets primarily related to the performance of care delivered by the ACO; and (3) process milestones measurable during the early years of the Model that would support achievement on the population-level and health care delivery system measures and targets.

Medicare ACO Initiative 

The CMS Medicare Fee-for-Service ACO initiative that is offered by CMS to ACOs in Vermont has been tailored for the Vermont All-Payer ACO Model. The Vermont Medicare ACO Initiative is based on CMS’ Next Generation ACO Model and will support ACO design alignment with other Vermont payers’ ACO programs. Participants in the Vermont Medicare ACO Initiative may not participate in the Medicare Shared Savings Program simultaneously.


The section 1115(a) Medicaid demonstration promotes delivery system and payment reform by allowing Vermont Medicaid to enter into ACO arrangements that align in design with that of other health care payers in support of the Vermont All-Payer ACO Model. For more information on Vermont’s section 1115(a) Medicaid demonstration extension see Fact Sheet and CMS Approval Letter.

Vermont State Employees Urged to Enroll Children in CHIP Program

Vermont Governor Peter Shumlin’s administration recently sent out a memo to over 2,000 state employees with household incomes under 300 percent of the federal poverty level (FPL), urging them to drop their private family coverage and enroll their children in Dr. Dynasaur, the state’s Children’s Health Insurance Program (CHIP) for children and pregnant women.

The suggestion was for the parent to obtain a single person policy, which would cost the parent $2,000 less annually than he or she is paying for the state’s private family health care plan. The administration claimed that for each parent who took this action, the state would save approximately $10,000 per year; it also stated that Vermont could save more than $5 million annually if only half the employees contacted made the switch. The state’s savings would occur because the federal matching funds for CHIP pay nearly 70 percent of Dr. Dynasaur’s costs.

In Vermont, a family of three with an income up to $57,000 per year would qualify for CHIP coverage. The administration emphasized that it is not altering any existing laws or program criteria but is simply informing state employees of their eligibility under the current program. No legislation or program amendments would be necessary–just the employee’s willingness to take advantage of the option.

The Commissioner of the Department of Vermont Health Access, Mark Larson, encouraged state employees to elect the public program option, stating, “It does provide an opportunity for coverage to be more affordable for a family and it does provide some opportunity for the state to provide health coverage for the family at less expense to the state.” He stressed that the Dr. Dynasaur program has not been expanded and that these families have always been eligible for the program.

The administration’s move has been criticized by opponents of the state’s proposed single payer system, such as the organization Vermonters for Health Care Freedom. They contend that the original intent of Dr. Dynasaur was to ensure that children of working families had access to health care when their families’ incomes were too great to qualify for Medicaid but they did not have access to employer-sponsored insurance plans. They argue that it’s not fair to shift more of the cost to state and federal taxpayers when employees do have access to a private plan.

Vermont joins at least six other states, including Alabama, Georgia, Kentucky, Montana, Pennsylvania, and Texas, which have also opened their CHIP plans to lower-income state employees.

Vermont Senate, House at Odds Over Police Access to Prescription Drug Database

While illicit drugs such as cocaine, heroin and methamphetamine are often the focus of discussions regarding drug abuse and addiction, some of the most commonly abused and deadly drugs are hiding in plain sight…inside of our medicine cabinets. Since prescription drugs such as Oxycontin, Vicodin and Xanax are typically issued by a physician, not dealt on a street corner, many people overlook their potential for abuse, addiction and even death. The National Institutes of Health estimate that 20 percent of all Americans have taken prescription drugs for non-medical reasons.

The state legislature in Vermont is taking steps to address the abuse of prescription drugs in its state, which has the 34th worst rate of such abuse. Per capita, Vermont has the second highest rate of people in their twenties that are admitted for treatment of opiate addiction. A report issued by the state’s Prescription Drug Abuse Workgroup, a joint product of the Vermont Departments of Health and Public Safety, called for tougher law enforcement initiatives against the sources of prescription drugs diverted for improper use. Some sources for the illegally distributed drugs include internet sites, forged prescriptions, health care workers, theft and the attainment of prescriptions from multiple physicians.

Last week, the Vermont Senate took a step to enable law enforcement officials in that task by voting to allow police access, without a search warrant, to the state’s prescription database, which is maintained by the Department of Health. The database, which contains the prescription information of state residents, was created in 2006 by a law that specifically provides that law enforcement does not have access to the information. Under the Senate’s plan, police could only access information related to ongoing investigations involving specific commonly abused drugs. Upon request, the Department of Health would provide police with a report containing vital information regarding the person’s prescription history.

Proponents of the Senate’s proposal point out that police presently can walk into a pharmacy without a warrant and obtain the prescription records of suspect individuals. They contend that this new law would simply make it more convenient for police to acquire this same information from a central source. Senate President, John Campbell stated, “We are not allowing police officers any more access than they already are entitled to…[they] should be able to use the technology that is available in order to find those people who are diverting drugs…”

The Senate’s proposal is an amendment to the House version of the bill, which allows police access to the database with a warrant. Lawmakers who oppose the Senate’s amendment appear primarily uncomfortable with the possibility that the absence of a warrant may count as an unreasonable search and seizure under the U.S. Constitution’s Fourth Amendment. Other opponents cite concerns over personal privacy and constituent support for a planned online insurance marketplace, which would include personal health records. Senator Phillip Baruth cited concerns over breaking “a promise” made to residents when the database was established that police would be unable to access their records.

Still, supporters see the Senate proposal as a compromise, stating that police will not have unrestricted access to resident records. They find that the dangers of prescription drug abuse outweigh the privacy risks, considering that last year, deaths resulting from prescription drug overdoses outnumbered murders and car accident-related deaths combined. Senator Dick Sears emphasized this concern when he said, “We believe that we have an epidemic.”