Health Care Advocate Morphs into a Threat to Reform

by Hamilton E. Davis 

   One of the marginal but still important players in Vermont’s health care reform project is the Health Care Advocate. The Advocate is an arm of Vermont Legal Aid, a stand-alone non-profit law firm, but it is funded by the Legislature and has permanent status as a party to the regulatory functions of the Green Mountain Care Board.
   The current Chief Advocate is Mike Fisher, a former legislator who played a key role in the early days of reform. A social worker, Fisher served seven terms in the Vermont House, representing the eastern Addison County towns of Bristol, Lincoln, Monkton and Starksboro. In his last three terms, he served as Chair of the House Health Care Committee. He lost his seat in the 2014 election; he was named Advocate in 2016.
   In his first two years as Advocate, Fisher pressed hard on the issue of the affordability of health care, especially for purchasers of insurance on the federally subsidized Exchange. For example, in the 2017 GMCB hearings on the rates that Vermont Blue Cross and the New York-based carrier MVP could charge its Exchange customers, Fisher hired an actuary to challenge the findings of both the Blues actuary and the actuary for the Board itself. It was pretty clear, however, that Fisher’s guy simply couldn’t compete with the other two experts, and the Board basically ignored him in the decision-making process.
   It wasn’t that Fisher’s views on affordability were invalid, it was that they didn’t contribute much of anything new. Everyone who has been paying attention over the last, oh, 30 years, knows that health care isn’t affordable. That is precisely why the federal Exchange, and the Green Mountain Care Board itself, and indeed the whole health care reform project exist in the first place. The relevant problem is what to do about it…
In recent months, however, Fisher’s tone has become increasingly strident. In September, for example, Fisher took the occasion of a medical issue in the Vermont prisons to suggest that the Vermont Department of Corrections had mis-allocated or lost $2.2 million of the payments to the contractor that delivers care to inmates. The medical issue was substantive, but there wasn’t any credible evidence to support the claim. The Advocate’s tone, however, was clearly prosecutorial…
If there was any doubt about that conclusion, it vanished early last month.
On Nov. 9, the Fisher urged the Green Mountain Care Board to reject OneCare Vermont’s 2019 budget on the grounds that the state’s Accountable Care Organization (ACO) “has not provided the Board with adequate information to exercise meaningful oversight.” Specifically, Fisher said OneCare still does not have final figures for its contract with Vermont Blue Cross for care delivered in 2018, or for 2019.
The Advocate’s letter also questioned OneCare’s ability to manage the quality of care delivered under its contracts, the way patients are managed, the transparency of OneCare’s operations, along with a series of lesser errors of omission and commission. The letter also charged that OneCare was deliberately misleading the Board; and it implied that the problems of the Vermont delivery system can be laid at the feet of the University of Vermont’s health network.
The question of budget approval is a critical one for OneCare and the issue of reform generally. The Board has scheduled a vote on the budget for Dec. 12, with a fall back date of Dec. 17. The decision is difficult because significant pieces of budget picture will not be available by then. That is not a failure on the part of OneCare. It is the result of a way-too-tight regulatory schedule: the state’s hospital budgets were not completed until Oct. 1, but OneCare’s budget, most of which goes to hospitals, goes into effect Jan. 1, 2019. The single most important element in the budget – the money that will be available to pay for Medicare recipients – has not come in from federal Medicare officials yet; last year, the numbers didn’t arrive until two days after Christmas.
Unless the Board loses its collective mind, it will reject the recommendation by the Advocate because that could threaten the reform project itself. Without budget approval, OneCare might not be able to disperse the prospective payments to hospitals that are the vehicle for the shift to a new financing mechanism. What the Board is likely to do is approve the budget on some sort of contingent basis, and then issue a final decision once all the numbers are available.
The Board is under no legal obligation to comply with the Advocate’s recommendations; but the content and tone of Fisher’s letter could have political ramifications down the road. That fact makes it important to look closely at the Advocate’s performance. The place to start is the following paragraph from Fisher’s five-page letter:
The University of Vermont Medical Center and UVM health network control an increasing proportion of the state’s providers as well as OneCare, the state’s only ACO. The Board must ensure it is regulating the health care system to prevent this monopoly from further exacerbating Vermonters’ affordability challenges and undercutting the success of the all-payer model…Our health care system must not privilege provider profits over cost containment and consumer affordability.
This paragraph alone indicts Fisher and the Advocate’s office for being intellectually dishonest, and politically irresponsible. Too strong? Let’s look at the evidence:
The central problem is the claim that the UVM health network is responsible for “further exacerbating” the cost problems in the system, and that it is “undercutting” the all payer model, the buzzword for the shift in the reimbursement of hospitals and doctors from fee-for-service to block financing at fixed prices. That claim is simply outrageous: it is not just wrong, it flies directly in the face of all the data that exists, as well as the history of the reform effort.
Beginning in the late 1960s, spending by all Vermont hospitals exploded, rising at eight percent or more year over year. In the decade 2000 to 2009, Vermont hospitals doubled their budgets, a performance that inspired the health care reform effort that began in 2011 with the Legislative passage of the basic reform law.  
By 2013, however, the Green Mountain Care Board was in charge and the whole cost environment began to change. The cost increase in the 13-hospital Vermont system from 2014 to 2015 was 5.0 percent, from 2015 to 2016 was 4.4 percent, and from 2016 to 2017 was 2.8 percent. The 2017 figures were the last actual numbers we have, but both the 2018 and 2019 budgets came in under 3.0 percent. During UVM’s budget hearing earlier this year, the Vermont Association of Hospitals and Health Systems submitted an analysis showing that the shift from the high 2000-2009 inflation track to the much lower 2013-2018 track saved Vermonters some $600 million.
How did that happen? The Green Mountain Care sets the cap of about 3.5 percent on the system, but the Board itself can only push for a given result. The actual work of getting the whole system cost down was carried out by the finance team at the UVM health network. Evidence? If you take the recent numbers and strip out the UVM figures, the system cost goes up by about 25 percent (from around three to four percent). Not convinced?
Take a look at the actual figures for the 2017 fiscal year. In that year, UVM’s Medical Center run over its budget by about $40 million, driven by an unusual influx of new patients. At the same time, some of the small community hospitals lost a large number of patients, although their budgets did not actually drop. The system result: the total cost increase dropped from 4.4 percent to 2.8.
If UVM represents about half the system, and its budget blows through the cap, how can the system cost go down? It’s simple, actually. UVM’s costs per capita are far below that of the community hospitals, mainly because UVM’s docs get paid salaries and therefore have no financial incentive to do more than less. The actual increase in UVM’s 2019 budget over 2018 was just over one percent, far below the 3.5 cap and also far below national inflation, which was running at three percent in the middle of this year.  
The fact that UVM’s cost per capita in its primary service area—basically Chittenden County--has been very low in Vermont since the early 1970s. It has also been true, by the way, in many other states. In Wisconsin, for example, costs per capita in the area surrounding the state’s academic medical center in Madison are far below the big tertiaries in Milwaukee; same between the academic center in Iowa City, compared to similar hospitals in Des Moines. The same result shows up in Maine, Washington, Massachusetts, and with particular effect when comparing costs in Boston and New Haven, where New Haven has one world-class facility at Yale, where Boston has several. Per capita volumes in New Haven are half the level of Boston….
These numbers lie buried in data bases that are accessed by health policy analysts, and it is not surprising that the average person doesn’t know anything about them. But the Advocate is not the average person. Fisher gets paid to understand them, and there is no evidence that he does so. And it’s not just Fisher himself. He has a professional staff of three or four, including lawyers and at least one credentialed policy analyst.
To me, the final sentence in the paragraph is the one that indicts the Advocate team as intellectually dishonest. That’s the one that says the Board must not “privilege profits” over cost containment and affordability. That is pure dog whistle material.
The fact is that there are no “profits” in the Vermont hospital system. All of our hospitals are non-profits. The hospitals do have margins of revenues over expenses that they retain on their balance sheets. It is often harmless to refer to these “margins” and “bottom lines” as profits. But it is not harmless in this case because margins are very different from profits in a private system.
In much of the economy, the profits for a company are the money that the owners of the business can take home and spend on whatever they want—cars, boats, ice cream, trips to Vegas. In a non-profit system, the margin money has to stay inside the entity itself. It can only be spent on stuff for the hospital, not the people that work there.
The most important single reason for maintaining a two to four percent margin or bottom line is the need for medical systems to borrow money in the national financial markets to pay for new infrastructure. If a medical company wants to issue bonds to pay for a new patient wing, for example, their bonds will be assessed by ratings agencies, and those ratings will depend heavily on whether your margin is considered healthy. UVM, for example, has been building a new, $180 million patient wing. The total cost of that over 30 years will approach half a billion dollars. Last year, UVM won a bond upgrade by the rating agencies, and it saved UVM, and thus Vermonters, tens of millions of dollars.
That does not mean that hospital big feet—senior administrators and specialist docs—can’t give themselves more money. They can and do. But profits have nothing to do with it. The salary increases just become expenses on the hospital’s books. That way, they can take the money home. If you want to see that process at work, look at the doubling of hospital budgets in the first decade of the millennium: given that 60 percent of hospital budgets are labor, the big feet took home some serious raises in that era.
Those days of wine and roses are over in Vermont hospitals. There are still very high salaries in the system, but they are constrained now by the steady pressure from the Green Mountain Care Board and the continuing commitment to cost containment by the UVM health network. The 2019 budget approved UVM’s Medical Center increase by a parsimonious 1.1 percent over 2018.
The reason for belaboring this point is that making OneCare Vermont appear a blundering spendthrift is that it could feeds the anti-reform sentiment still alive in the reform environment, particularly the Legislature. It is also true that the Advocate’s broadside could be used as a club to beat on the Green Mountain Care Board itself. During the recent political campaign, for example, Gov. Phil Scott mentioned that he might consider trying to cut the Board from five members to three. And in an earlier kerfuffle between the Advocate and the Board, former Gov. Howard Dean tweeted that the Board had never accomplished anything worthwhile.
In its letter, the Advocate listed several other shortcomings that it found in OneCare’s operations in such areas as transparency, quality control, and case management. All these issues are complex, and in general the Advocate’s factual positions are often valid, but its expectations for high performance at this early stage of the game are simply unrealistic. It’s like complaining about heat loss in a new house that doesn’t have a roof yet.
The argument set forth above is a quick overview of a reform issue that must be addressed in the next two weeks. There are a number of other issues that stand in the way of achieving a final form for the whole Vermont project. I have suggested that the last pieces of the puzzle need to be put in place by early spring of 2019. I will post analyses of all of these in the coming winter.
The important question right now is whether the Board approves the OneCare budget in some fashion or whether it accedes to pressure from the Advocate, and threatens the reform movement itself. We’ll know the answer to that question in the next two weeks.

Reform Moves Ahead Against Strong Headwinds

by Hamilton E. Davis


Vermont’s health care reform initiative, now in its eighth year, has achieved a significant level of success, and is within sight of its ultimate goal of sustainable costs for its acute care hospital-doctor system. No such system in the United States has accomplished that since health care spending began to soar in the late 1960s. At the same time, however, the reform landscape is marked by powerful tensions between the players that could derail the whole enterprise.
The administration of Gov. Phil Scott, the Green Mountain Care Board, OneCare Vermont (the state’s Accountable Care Organization), the University of Vermont’s health care system, Blue Cross and Blue Shield, the state’s small community hospitals, the primary care doctor community, the Vermont business community, the Vermont House, the Vermont Senate—all face serious challenges as reform enters the home stretch.
Will Phil Scott step up to the difficult task of leading a reform project that he has been ambivalent about since he took office two years ago? The Green Mountain Care Board has presided over a striking course of cost discipline for hospitals; but it has also made some serious mistakes to the point that there is now serious consideration of changing the Board structure itself. Blue Cross and the University of Vermont’s Medical Center are locked in a bitter dispute over payments by Blue Cross for care at UVM, which is just a symptom of the fact that the Blues and UVM and OneCare Vermont appear to be operating at cross purposes on reform. If they can’t get on the same lily pad, then reform will be far more difficult.
The primary care community has supported reform with the considerable reluctance to the point where both the Green Mountain Care Board and OneCare have discussed changing the way patients are referred to OneCare’s contracts. Will the Board go that far?
Since the late 1970s, the state has assessed hospital budgets on the basis of how much they spent each year. There has been increasing dissatisfaction with that metric, however, and OneCare and the Green Mountain Care Board are discussing whether to shift to the per capita cost of care in a given hospital service area. That would be a much better way to do it, but what would be the effect on the small community hospitals?
The UVM system has led the way to the cost containment success, but it has been plagued for years by bitter opposition from elements in the press, in the Legislature and in the larger political community. Question: will UVM figure out how to tell its own story? And the House and Senate, which demonstrated considerable hostility to, as well as ignorance of reform, will see important changes: possibly a new Speaker in the House, definitely a new chair of Health and Welfare in the Senate. How will either chamber react if the final phase of reform needs legislative action?
It has taken eight years to get this far, but the answers to these key questions really need to be hammered out in the next four to six months. By late February, Vermont’s hospitals will begin building their Fiscal Year 2020 budgets, and if their regulation system is going to change the financial teams will have to know by then how to deal with a new system.
Following is a quick sketch of the major issues affecting the reform initiative. I’ll look at each one in more detail as it plays out through the fall and early winter.

The Scotties:

Phil Scott, by all insider accounts, is fully committed to reform. Being on board, however, is far from taking any kind of an active role, and even farther from taking ownership. On the current regulatory track for the state’s hospital system, which began in FY2013, the reform effort has saved Vermonters in the neighborhood of $600 million, compared to the first decade of the millennium. The regulatory system, in short, is basically working. 
The real bite in the reform project, however, will come in the shift from fee-for-service reimbursement that will put hospitals and doctors at financial risk for the system they run. In FY2018, which closed on Oct 1, 20 percent of the Vermont population has been in fixed price risk contracts that for the first time in modern history have protected the public against skyrocketing health care costs. And there hasn’t been any noticeable level of complaint.   
Moreover, the potential for further cost savings dwarfs anything that Scott has even dreamed of. Earlier this year, he threatened a shutdown of state government in an effort to save $26 million in the state’s education system. Scott could work to get the state employees, and possibly the state’s teachers, into risk contracts that would cap health care cost inflation at half its historic rate.
During most of his first term, Scott treated the Vermont reform like a live hand grenade. Over the last several weeks, though, he has sounded something of a different note. In one of his early debates with his gubernatorial opponent, he mentioned that he might consider cutting the Green Mountain Care Board from five members to three. That was probably a reaction to outrage in the hospital community about how the Board managed the hospitals’ FY2019 budgets. He went even further in the most recent debate, when he said that the state reform project is working, and that it would be expanded. Assuming Scott gets reelected, it will be interesting to see whether he’ll take decisive action, like trying to move the state employees, and possibly the state’s teachers, into the reform structure.

The Green Mountain Care Board:

The Green Mountain Care Board is in a strange kind of limbo. From one perspective, it has done a terrific job, better than any single health care entity in the United States. Vermont’s 13 hospitals, whose costs rose at three and four times the rate of inflation since the 1970s, have trended steadily downward since 2015, when the inflation rate was 5.0 percent, near the U.S. average, to 4.4 percent in 2016, to 2.8 percent in 2017. Those are actual numbers. The budgets approved for 2018 and 2019 run about 2.9 percent. In July of this year, national inflation came in at 2.9 percent. The forecasts for the national health care system range from four to six percent, as much as twice as high.
These striking results, for which the Board can take some credit, are masking the fact that the Board has made some serious mistakes; it also masks the fact that the numbers have been accomplished almost entirely by efforts undertaken by the University of Vermont’s health care management team. If you take out UVM’s Medical Center, then the inflation rate in the system rises to a far more pedestrian four percent or so.
What are the mistakes made by the Board? The first came two years ago when the Board approved the construction of a for-profit, stand-alone surgical center in Colchester. The apparent reason for this decision was that the Center could provide some price completion for UVMMC. That decision ran directly contrary to the principle underlying the Vermont reform project that the state system needed to move away from competition to integration. They compounded that error when they declined to weigh in with the Senate on the question of whether there should be any regulation of the center.
The Board wandered into a much denser thicket during the September hospital budget hearings. The Board told the hospitals last spring that they should not increase 2019 spending by more than 3.2 percent. Regulators have given hospitals this sort of “guidance” since the mid-1990s, and the understanding has always been that if the hospital came in under the cap, the Board would not mess with the internals of the budget.
Not this time. During hearings on Sept. 5, 11 and 12, the Board members decided to change the rates that hospitals would be allowed to charge commercial carriers like Blue Cross and MVP or Cigna for care they delivered. The most important order came on UVMMC’s budget, which called for an increase of 4.0 percent in commercial rates. The Board also ordered changes in the rate structures of several community hospitals. The first problem arose in the way the discussions themselves ran. The members just started wondering how they might change those rates; there appeared to be no connection with the amounts of change contemplated and what was actually happening on the ground. “So, Robin, I’m comfortable with three percent, what are you comfortable with?”
There are hundreds of pages of transcripts of these three hearings, and I haven’t gone through all of them; but I will, and I’ll report on what I found later this fall. For now, trust me that the whole hospital community flew into a total rage at this performance. They saw it as arbitrary, and further evidence of what they have believed for some time, that the Board doesn’t really understand the industry they are regulating. Worse than that was the clear inference to be drawn that the members don’t grasp the difference between regulation and management.
The above just scratches the surface of this issue, but its importance is clear enough. The reaction in the industry has led to a plethora of insider speculation that the Board may need to be constrained, modified, or otherwise recast or even eliminated. Governor Scott himself alluded to this speculation in a recent debate with his political opponent when he said that he would consider trying to cut the five-member board to three. Any such step would trigger a full reconsideration of the whole reform infrastructure. Be interesting to watch, especially if the Governor is on the sidelines.
The decision on whether to mess with the Board itself will probably turn on its decision on the OneCare Vermont budget, which came before the Board last week. The key element in that budget is whether to interdict the federal government’s decision to increase payment for care to Vermont’s Medicare recipients by 3.8 percent. That number is well above the Board’s target spending of 3.2 percent going forward; it exceeds by even more the hospital system inflation rate of just under 3.0 percent.
At the same time, however, it is clear that the whole hospital system, and especially UVM, needs every penny it can get in federal funds as it moves ever deeper into financial risk. If the OneCare budget goes through reasonably unscathed, the players will probably overlook their unhappiness over the Board’s September machinations on the commercial insurance rates. If the Board reduces the Medicare rate in an effort to maintain a lower system level cost, it will probably face a challenge in court. That eventuality would very likely trigger a reexamination of the Board’s structure and processes.

The Scale Problem:

The population of Vermont is about 625,000. Some 75,000 of those are ineligible to participate in reform because they are attached to the military, or work for out-of-state employers. The state’s contract with the federal government requires that 70 percent of the remaining 550,000 be enrolled in risk contracts by 2022. The state is nowhere near that 385,000 target, nor is it on a track that is likely to lead there. Call it the scale problem.
There are several issues contributing to that shortfall. One is that the primary care doctor community has been reluctant to engage with OneCare in the implementation of reform. The backstory there is the rule that patients can only be attributed to OneCare by being referred there by their primary care physician. About 300 of the state’s primary care docs are employed by hospitals, so the attribution question there depends on the hospital. That’s too small a network to reach the levels of enrollment demanded by federal officials.
One of the sources of reluctance to engage with reform has been the Federally Qualified Health Centers (FQHCs)—small groups of primaries in mostly rural areas that get federal subsidies to keep them in business. That is changing now, but slowly. And even if all the FQHCs jumped in, it would not be enough to get hit the scale targets. Still, the foot-dragging by the FQHCs has galvanized discussions about changing the attribution rules to permit attribution to an ACO by a community hospital, or even by place of residence. That decision needs to be made in the next several months.
Another major player from a reform perspective is Vermont Blue Cross. Blue Cross enrolls some 210,000 Vermonters in some form of health insurance. Of that number, 52,000 are in the federally subsidized Exchange; and of that number the Blues attribute 18,000 to risk contracts with OneCare Vermont. The remaining 160,000 or so patients are divided into those who purchase insurance and those who are part of self-funded health plans, where the Blues handle the paper work. The Blues don’t break out that split, but a fair guess would be that at least 100,000 Blues patients could be attributed to a risk contract. With less than one in five Blues policy holders going that route, Vermont probably can’t hit the scale target. A critical question, therefore, is whether there is some kind of political problem between the Blues and OneCare; and, in any event, what it will take to resolve it.
Which illuminates yet another problem: hitting the scale target will require significant participation by self-funded plans, like those of large employers. The Vermont business community, with some exceptions, has been missing in action on health care reform, even though it is a major beneficiary of the cost savings that have flowed from it thus far. The federal target probably cannot be met without more participation from the self-funded sector.

The Vermont Legislature:

In the early days of reform, the Vermont Legislature was fully on board the train. The members didn’t understand it very well, if at all, but they had confidence in the team that then-Gov. Peter Shumlin put on the field. That all began to go south in 2013 and 2014, when the Shumlin administration bungled the rollout of the federally financed insurance Exchange; the tatters of the program’s credibility vanished in late 2014 when Shumlin abandoned the financing element of the reform plan.
By 2015, the Legislature was free-lancing on health care reform, and it wasn’t pretty. From 2011 through 2014, the members didn’t need to understand health care reform, probably the single gnarliest public policy hairball that ever afflicted the halls of the statehouse. They have no staff of their own—the handful of players in the Joint Fiscal Office watch health care, but they do little to nothing to actually drive it. In the early days, however, lawmakers didn’t need to do much, if anything. And if they wanted something explained to them, they could call in the actual architects and managers of the program.
Once there were no adults in the room, however, the members began to rock and roll. One of the themes that appeared was that the problems of the health care system were caused by the University of Vermont’s health network. The UVM system was too big and dominant. It bullied the small guys and tried to buy up the little guys or run them out of business. Some of the most virulent criticism came from the Progressive-Democratic left: leading critics included the Chittenden County Sens. Tim Ashe, Michael Sirotkin, and Chris Pearson.
The anti-UVM campaign was spectacularly wrong in virtually every dimension. Plainly simple, there wouldn’t be any Vermont reform without UVM’s leadership, let alone an effort that is outperforming every state-wide hospital-doctor system in the country. Moreover, so far from being a malign influence, UVM’s medical college and its tertiary hospital is one of the most vital cogs in the state’s economy; and its quality performance leads the whole hospital system.
Given the toxic political environment for UVM, I don’t expect even my marvelously perspicacious readers to accept my mere assertion. But hang on, you’ll see the full panoply of evidence in this space soon.

GMCB Needs to Get Out of the Weeds, Fast

by Hamilton E. Davis


The University of Vermont Medical Center sent a very strongly worded letter to the Green Mountain Care Board Wednesday, urging the Board to reverse its decision to cut UVM’s proposed increase in the rates it charges Vermont Blue Cross for care delivered to Blue Cross patients.
This letter is very significant: it illuminates a catastrophically botched budget process by the Green Mountain Care Board and if that process is not repaired the failure will endanger Vermont’s health care reform, which has already saved Vermonters more than half a billion dollars and has placed the state in the forefront of the country’s effort to get health care costs under control.
The decision at issue was made on Sept. 12, when the Board ordered UVM to drop the increase to commercial carriers from 4.0 percent to 2.5; the move trimmed $6.75 million from UVM’s proposed budget of $1.2 billion budget for Fiscal Year 2019, which begins Monday, Oct. 1.
 The core mistake by the Board was the effort to solve the problem of the Blue Cross rates not by addressing the obvious problems with Blue Cross, but by treating UVM as a piggy bank to solve those problems. Taking money away from one player in the system to solve problems of another player is to risk the whole reform enterprise. That dynamic was laid out in detail in the letter from John Brumsted, the CEO of the UVM health network, to Kevin Mullin, the chair of the Green Mountain Care Board.

The UVM case

   Following is an outline of the case made by UVM. I have published the full text of the letter in another post on A Vermont Journal. For those among my tiny corps of brilliant readers who are really concerned about health care reform, the full text will be a revelation. So, herewith the precis:
The framework for this discussion is the so-called All Payer Model, which nobody talks about in simple terms and which most people, including important ones like members of the press and the Vermont legislature, have no serious understanding of regardless how simple the terms. The essence is this: For the last, oh, hundred years or so Americans have paid for health care by paying for each episode of care. That Fee-For-Service reimbursement scheme has led to exploding health care costs because the volume of care is highly variable and is decided not by the consumer, but by the doctors. That turns conventional economics on its head: competition tends to drive total costs up, not down.
The All Payer Model is simply a federal waiver to permit a state like Vermont to switch its reimbursement from fee-for-service, which is breaking health care budgets everywhere, to capitation, which means that a group of medical providers can contract with doctors and hospitals to provide a full range of care to big groups of patients at a fixed price. That dynamic shifts the risk for the financial performance of the delivery systems from patients and payers to the providers themselves.
That kind of shift, in turn, means recasting the health care system from competition mode, to cooperation and integration. Vermont has been doing just that the last eight years, and it is now proving to be amazingly effective. The inflation rate for the last year with full figures showed that the Vermont hospital inflation rate from 2016 to 2017 was 2.7 percent, about half the rate in the rest of the country. If you compare that performance with the results from the hospital system in the decade of the ‘oughts you get a savings to Vermonters of more than half a billion dollars. Here are the bones of the UVM case.

  • Governor Scott, Kevin Mullin, the chair of the Board, and Al Gobeille, Sectretary of the Agency of Human Services, signed a binding agreement with federal Medicare and Medicaid officials on Oct. 27, 2016 to use the All Payer Model structure as the framework for delivery system management reform in Vermont. That agreement, Brumsted wrote, committed the Board regulate the system so as to permit hospitals to assume “the enormous new financial risk associated with the fixed payment system that is the key to wringing value out of our health care system.”

  • The UVM Health Network hospitals “have been all-in” on the (All Payer Model), redesigning our entire system of care in order to deliver on the APM’s promise.” That claim is actually understated. Everyone wants to take credit for the Vermont performance, especially the Green Mountain Care Board itself, but the reality is that the entire result has been driven by the performance of Brumsted and his senior financial and management team. I don’t expect my brilliant readers to accept that judgment without evidence, but stick around, you’ll see it before Halloween…

  • Here is the essence of the UVM case: “Unfortunately, the Board’s decision to reduce the UVM Medical Center’s budgeted commercial rate does not…honor the commitment the GMCB made to the federal government or the All Payer Model participants. It does the opposite…
      “By weakening the UVM Medical Center’s financial health, the Board’s decision makes it far less likely that the Medical Center can responsibly assume risk under the APM, either now or in future years. By setting the UVM Medical Center’s commercial rate at an artificial level, rather than allowing the Medical Center to (manage) that rate within (the Board’s total spending cap), as the Board had previously agreed, the (Board) may actually make continuing to pay ‘fee-for-service’ and attractive option for insurers, employers and patients.”
      While the UVM letter did not mention it, another anomaly embedded in the Board’s decision was the fact that while the hospital was ordered to cut north of $6 million out of its revenue figure, it was allowed to keep its budget total the same. The implication of that is the Board was encouraging UVM to ramp up its volume, just to make up the shortfall from Blue Cross. Given that excess volume is the cancer at the heart of the hospital cost problems, such a proposition is not just unwise, but disgraceful. That is true even if UVM is highly unlikely to lean toward bogus utilization.

  • What angers the UVM group, and in fact most of the hospitals, is their belief that the Board isn’t complying with its own rules. According to the GMCB rules, Brumsted wrote, “the Board may adjust a hospital’s proposed budget if it does not meet the ‘benchmarks established by the Board…This year, the Board’s budget guidance limited hospital (growth) to 3.2 percent…The Board’s guidance did not set a benchmark related to commercial rate increases, hospital operating or total margins, or any other financial metric…
    “The UVM Medical Center followed all the rules laid down by the Board,” Brumsted wrote. “It submitted a budget with a low 1.1 percent (total spending figure), approximately one-third of the growth rate allowed by the Board…It is worth noting that the Board’s guidance allowed the Medical Center to propose an additional $19 million in patient revenue, and twice the increase in commercial rates the hospital ended up proposing.
    “Yet, the Medical Center did not propose a budget designed to take advantage of that financial headroom. Instead it held the line on both revenue and rates…” Brumsted wrote.

  • The last item in the UVM letter criticized the way the Board reached its decisions on how to cut commercial rates. The decisions didn’t seem connected to any real issues on the ground for each hospital. That last was seriously understated. The discussion in the Board was an absolute shambles, a toxic mix of hubris and whimsy. The members just wandered around for what seemed like hours, speculating on how they might change the “ask” for each hospital. There was no apparent connection to anything specific.

It is unreasonable to ask even my exquisitely capable readers to wander around in the transcripts of three days of Board hearings to assess the arguments put forward by UVM. I will do that myself, however, and publish the results as soon as possible.
Meanwhile, the issuance of the UVM letter has triggered a cascade of important questions about the future of reform, and I am going to lay those out as best I can over the next several weeks. Stay tuned. By the time the leaf peepers have come and gone, my brilliant readers will have a better grip on this saga than anybody else.
Count on it.

UVM to Board: Reverse This Decision

September 26, 2018

Chair Kevin Mullin
Green Mountain Care Board
144 State Street
Montpelier, VT 05620

Dear Chair Mullin:

I write to express my deep concern regarding the Green Mountain Care Board’s decision to adjust the UVM Medical Center’s FY 2019 budget as well as the process that led to that decision. Simply put, the Board’s decision is at odds with the long-term success of the All-Payer Model (APM) and will ultimately result in higher, rather than lower, health care costs for Vermonters.

The GMCB’s Proposed Order Will Destabilize the APM

On October 27, 2016, the Governor, Chair of the Green Mountain Care Board and Secretary of the Agency of Human Services signed the Vermont All-Payer ACO Model Agreement with the Center for Medicare and Medicaid Innovation. By entering into that binding Agreement, the parties committed to supporting the APM as the primary tool through which the State of Vermont controls the cost and improves the quality of health care for all Vermonters. Since then, The University of Vermont Health Network has been “all in” on the APM, redesigning our entire system of care in order to deliver on the APM’s promise.

The APM will only succeed if Vermont’s hospitals and other providers are able to continue to make the significant investments necessary to support OneCare Vermont and to assume the enormous new financial risk associated with the fixed prospective payment system that is the key to wringing value out of our health care system. Those costs and risks are at their greatest during the formative years of this “bold experiment” because all of the participants are learning how to handle unprecedented, and at times unpredictable, change in both care delivery and payment.

The UVM Health Network’s hospitals have kept their commitment to support the APM, shouldering the bulk of the associated expense and risk. Of course, that commitment is not without cost, and the UVM Medical Center’s budget was carefully calibrated to provide the necessary continued investments in OneCare Vermont and to maintain the financial health required to assume risk on fixed prospective payments of nearly $200 million. I believe these investments will ultimately be seen as among the wisest and most forward-looking our health care system has ever made – reducing the cost of care and improving the health of all Vermonters – but only if our regulators also support the long-term success of the APM.

Unfortunately, the Board’s decision to reduce the UVM Medical Center’s budgeted commercial rate does not demonstrate that support. Nor does it honor the commitment the GMCB made to the federal government or the APM’s other participants. It does the opposite. By reducing the UVM Medical Center’s ability to invest in OneCare, the Board’s decision undermines the foundational infrastructure of the APM. By weakening the UVM Medical Center’s financial health, the Board’s decision makes it far less likely that the Medical Center can responsibly assume risk under the APM, either now or in future years. By setting the UVM Medical Center’s commercial rate at an artificial level, rather than allowing the Medical Center to “solve for” that rate within the Board’s NPR growth benchmarks, as the Board had previously agreed, the GMCB may actually make continuing to pay “fee for service” outside of the ACO an attractive option for insurers, employers and patients. It also appears misaligned with the targeted rate of growth for health care delivery under the APM, which was developed over years of discussion among CMMI, GMCB leadership and provider stakeholders.

In sum, the Board’s proposed order will destabilize both the UVM Medical Center and Vermont’s All-Payer Model just as they, working together, are beginning to bend the cost curve. If that occurs, the Vermont hospitals’ prior investments in the APM will have been for naught.

The Board’s Order Will Not Result in Lower Rates for Commercially Insured Patients

Nor will the Board’s decision do anything to predictably reduce the cost of commercial health insurance for Vermonters in the shorter term. As you know, the UVM Health Network has long been urging a higher level of coordination among the hospital budget review process, the commercial insurance rate-setting process and the ACO budget review process. At best, those processes currently do not communicate with one another; they are ships passing in the night. At worst, they work at cross purposes to one another; as described above, decisions made in one process affirmatively harm the stated goals of another. As a result, Vermonters have no way to understand, and regulators have no way to explain, how changes to hospital budgets affect commercial insurance rates, either inside or outside the APM.

The UVM Health Network remains committed to reforming these regulatory processes so they work together to transparently illuminate and then control the true reasons for rising commercial insurance rates in Vermont. For instance, the regulatory processes should use consistent, per-patient measures of the cost of care. They should all regulate on actual-to-actual bases, rather than budget-to-budget. They should all be designed to build reserves at the entities charged with assuming risk, or facilitate a shift in reserves from those delegating risk to those accepting risk. They should then be sequenced in such a way as to allow the processes to meaningfully inform one another. Only when we make these and other related changes will regulators and hospitals ensure the savings we achieve are passed along to Vermonters.

The FY 2019 Budget Review Process Was Unpredictable At Best

Until this year, when a hospital submitted a budget in line with the GMCB’s guidance, the hospital could be confident that its budget would be approved without major adjustments. This consistent and principled approach by both the hospitals and their regulators has succeeded. Vermont is bending the health care cost curve more effectively than nearly any other state.

In contrast, the budget review process that led to the Board’s decision regarding the UVM Medical Center’s FY 2019 budget was unpredictable, at best. The Board repeatedly failed to judge hospital budgets by standards it had previously articulated. As a result, even hospitals that followed all of the rules had their budgets adjusted downward.

According to the GMCB’s own Rules, the Board may adjust a hospital’s proposed budget if it does not meet the “benchmarks established” by the Board to “guide . . . its decisions whether to adjust a hospital’s proposed budget.” (GMCB Rules 3.303, 3.305, and 3.202.) This year, the Board’s budget guidance limited hospital NPR growth to 3.2%, including 0.4% for health reform investments. (FY 2019 Hospital Budget Guidance and Reporting Requirements at p. 9.) The Board’s guidance did not set a benchmark related to commercial rate increases, hospital operating or total margins, or any other financial metric.

The UVM Medical Center followed all of the rules laid down by the Board. It submitted a budget with a low 1.1% NPR increase, approximately one-third of the growth rate allowed by the Board. Through simple math, that patient revenue produced a 4% commercial rate increase. It is worth noting that the Board’s guidance allowed the Medical Center to propose an additional $19 million in patient revenue, accompanied by an 8.2% increase in commercial rates. Yet, the Medical Center did not propose a budget designed to take advantage of that financial headroom. Instead, it held the line on both revenue and rates, proposing a budget that contained only the patient revenue necessary to meet its obligations to its patients, it community and the APM Agreement, but no more.

Nonetheless, the Board’s decision cuts the UVM Medical Center’s commercial rate increase by 37.5%, from 4.0% to 2.5%. The transcript of the budget hearings reveals that the Board mentioned many and varied factors in support of its decision. The one thing those factors have in common is this: none of them was previously identified by the Board as governing the budget process.

The Board should not rely on new or newly articulated factors to cut hospital budgets. In the short term, that approach risks producing the sort of unintended consequences discussed above. In the long term, it risks far more than bad outcomes. It undermines the strength and transparency of our regulatory process, transforming it from one based on principles to one based on politics.

We look forward to working with you, your fellow Board members and GMCB staff to address these concerns.



John R. Brumsted, MD
President and Chief Executive Officer

Opinion Makers on Health Care Reform Turn in a Boneheaded Performance

by Hamilton E. Davis

   Vermont’s health care reform initiative is now in its eighth year and it is actually doing amazingly well, given the godawful difficulty of the central task—getting health care costs under control. Annual inflation rates in the Vermont hospital system are half those in the rest of the country. Every once in a while, however, some brush fire blows up that illuminates the adverse political pressures that reform has to overcome. The recent brouhaha about insurance rates for the Obamacare Exchange is one of those.
   Every year Vermont Blue Cross and MVP, a New York-based insurance carrier, ask the Green Mountain Care Board to approve increases in the rates each charges for insurance purchased from the Exchange; the federal government subsidizes this system, but, especially at higher incomes, the policies can be very expensive.
   The proceedings take place in a rigidly legal format; they are a courtroom trial, governed by state law and the rules of evidence. And the Green Mountain Care Board has to walk a very narrow line in the process: on the one hand, the Board has to get premiums for consumers as low as possible, given the costs generated by the medical delivery system; on the other, the Board has to ensure that the carriers rates are sufficient to keep them solvent, a requirement enforceable by the Vermont Supreme Court. A bankrupt insurance company could leave tens of thousands of Vermonters with no coverage.
   A major cog in this government machinery is the Health Care Advocate, whose assignment is to press the Green Mountain Care Board to ease these the very considerable burdens on the 80,000 or so Vermonters who get coverage on the Exchange. In the past, Mike Fisher, the Advocate, has hired an actuary to joust with the actuaries for the Board and for the carriers over what the rates should be.
   This year, Fisher took a different tack. He petitioned the Board to allow him to testify as an “expert witness” on the issue of whether the policies sold on the Exchange were affordable. The Board denied the petition on the grounds Fisher didn’t fit the legal definition of an expert witness. Of course, he could carry out his normal functions as a party to the proceedings. He could ask questions of witnesses, and he could put on his own witnesses, either an actuary—or a real health policy “expert.” Moreover, he could testify himself on “facts” that he wanted the Board consider; he just couldn’t be labelled an “expert witness.”
   The cascade of errors began about 10 days ago when VTdigger reported that Fisher would not be allowed to participate in the hearings all. “Consumer Advocate Barred from Insurance Rate Hearing; State Won’t Say Why”, the headline read.
   Pandemonium ensued. Former Governor Howard Dean tweeted his outrage: “The Green Mountain Care Board has never been effective,” he wrote. “The people who serve on it are good people but this action makes them look like they are in the pocket of the insurance companies. GMCB should be disbanded.”
   Sen. Michael Sirotkin, the Chittenden County Democrat, weighs in on Front Porch Forum, taking credit for passing the law establishing the Health Care Advocate and urging the Front Porchers to comment on the affordability issue to the Board. Tim Ashe, a Democrat/Progressive and the President pro tem of the Senate went the tweet route:
   “Totally tone deaf of the state’s two health insurers to try to block the consumer advocate from, well, representing consumers when they are proposing big price increases for insurance. The regulators should toss the request in the wastebasket.”
   Tom Pelham, the newest member of the Board, told the press he didn’t see any harm in Fisher testifying about affordability, thereby undercutting his own Board’s decision. And Jon Margolis, Digger’s political columnist suggested the Board was a “lapdog” for the insurance companies, in a way that that appears to make the Board and the carriers “arrogant, blasé, about adding to the financial woes of their customers, and hostile to democracy.”
   Wow, that sounds like a very big deal…Actually, it isn’t. The insurance company rates are important, but the Health Care Advocate will have no impact on them at all. That isn’t the advocates' fault: Mike Fisher wants the Board to understand that the cost of health care is not affordable, which it obviously isn’t. But every sentient being who hasn’t had his or her head under water for the last 20 or 30 years knows they aren’t affordable—that’s why the health care reform effort, and, indeed the Board, exists. The problem isn’t knowing health care costs are too high, the problem is what to do about it. And paroxysms of stupidity don’t help in that regard at all. Let’s count the ways:
   In the first place, the first VTdigger story was wrong—the health care advocate wasn’t being barred from the hearing by the Green Mountain Care Board. They couldn’t do that if they wanted to—which they didn’t. Under state law, the Advocate is a party to issues like insurance rates. Fisher not only gets to go to the hearings, he gets a privileged seat there. He can question the various witnesses, and he can put on his own witnesses in support of any argument he might want to make. What he did get barred from doing was acting as his own “expert witness” on the question of affordability. The reason is that he doesn’t begin to qualify as such as witness under the law. Fisher cited his service as vice chair of a Vermont House health care committee, but that proposition is simply laughable. An academic health care economist sociologist could probably qualify. Fisher doesn’t. In fact, Fisher talked earlier in the year about putting on just such a witness, and obviously changed his mind. He spent his money on an out of town lawyer who would question him (Fisher) on his views about affordability.
   And in fact, the Health Care Advocate got his arguments before the Board, with no real problem. In the Blue Cross hearing, Jay Angoff, Fisher’s Washington lawyer, went after Blue Cross hard, eliciting a concession from a Blues witness that the Blues couldn’t even define “affordability”. Angoff easily made his point that the Blues products on the Exchange are not affordable in any real world sense. As in an ordinary person would have huge difficulty paying for them. It would have been a signal accomplishment if the Board didn’t already understand the point as well as, or possibly much better, than Angoff did…
   In the MVP hearing, Fisher himself spoke to the Board on a “fact” basis about affordability; and no one would be surprised to hear that the insurance rates aren’t affordable.
   As I said earlier, the rate question is very important. The path through that minefield is worked out in the contest between the actuary for each carrier, and the actuary for the Green Mountain Care Board. The actuaries study the cost data and supporting information for each book of business and then strike what each believes is an equitable rate level. The Board almost certainly will cut the rates requested by each carrier; at least that’s what it has done in the past. The size of the cuts, however, will fail to achieve “affordability.” The Board will rely on soft spots suggested by its actuary, and it will throw in whatever amount of political reduction aiming at easing the burden on Vermonters it thinks it can get away with. That’s basically how the system works.
   What was the significance of the whole Health Care Advocate flap? Basically, nothing at all. In his capacity as advocate, Fisher just nibbles around the edges of the tangle of issues the Board deals with. The whole reason that health care costs, and the consequent reform efforts, have galvanized the whole country is because health care costs are unsustainable, and the public can’t afford them. The real question is what to do about it. Nothing in the rate hearings shed any new light on that.
   The issue of political leadership on health care reform is directly pertinent, however, and it is worthwhile looking at the fallout from the rate hearing to assess that. Several important players fell short there.
   One was VTdigger, whose reporter got the initial story wrong: The Advocate was never “barred” from the hearings. Digger corrected its story a few days later, but it never corrected the headline. And given that there is really not any other day-to-day journalism coverage in Vermont, the damage a bad Digger story can do is considerable.
   The tweet storm cited above serves to demonstrate that point. Neither Dean, Sirotkin or Ashe bothered to check whether the Digger story was valid. The Sirotkin comments on Front Porch Forum were reasonable and harmless, despite the fact that they were inspired by error. But Dean and Ashe just launched right into the yahoo mode. Ashe’s suggestion that the Board throw the motions by the insurance carriers “in the waste basket” may sound good on the street, but would be irresponsible in a courtroom.
   The really bad performance came from former Governor Howard Dean. Dean really wasn’t interested in the insurance rate issue. His claim was that the Green Mountain Care Board “has never been effective”, that it appears to be “in the pocket of insurance companies,” and he concludes:
   “The GMCB should be disbanded.”
   That proposition is preposterous, right out to the point of being irresponsible. Dean, who is a physician and who, as Governor, managed the health care system, more or less, for 11 years, has got every element of his tweet wrong. There is not a scrap of evidence that the members of the Green Mountain Care Board are in anybody’s pocket.
   As for the Green Mountain Care Board never accomplishing anything, that is simply false. The Green Mountain Care Board has cut the annual inflation rate for the Vermont hospital system by two thirds; and its oversight of the process of shifting health care reimbursement from fee-for-service to capitation has put Vermont in the forefront of health care reform in the United States.
   It is fair, therefore, to ask just how boneheaded commentary by major players in the system, from political leaders to the press, actually impedes the progress of reform. In fact, it hasn’t blocked reform in any serious way-yet. But it remains a constant threat. In the 2017 legislative session, for example, Senator Sirotkin pushed hard for something called the pay parity act that was so wrong-headed that it finally fell of its own weight. (My tiny corps of elite readers may recall my posts on that).
   A contrary example occurred in this year’s session when Ashe, in his capacity as the Senate boss, steered the so-called universal primary care bill into the weeds, which is where it belonged. (My elite readers may recall those posts, also). That was a signal piece of courageous leadership, given how popular the universal primary care idea is and how damaging it would have been to Vermont reform. The narrow point here is that Ashe is a very important player and it matters whether he plays well, or not.
   The broader point is that the same is true of the other opinion makers. Remaking the health care delivery system and driving its unsustainably rising costs down to the Consumer Price Index is hideously difficult, and in the long run the outcome will have to be acceptable to the public.
   The opinion-maker performance in the insurance rate cases was simply shameful. Anyone who thinks that such a performance isn’t a dangerous risk to the whole reform effort needs to think again.

Takeaways from the Disaster

by Hamilton E. Davis

Following are a series of only moderately ill-tempered conclusions I have drawn from the nervous breakdown suffered by the Vermont House on Friday. I sketched that process in my last post. Herewith my effort to see where we stand now:

  • All the issue blatheration that ruined a perfectly nice day Friday is dead. What the Senate is willing to do is to give Scott his tax-free request for Vermont homeowners in 2019, plus a little, say $4 million or so, off the non-residential and business category of property tax for the coming year. In financial terms, that would look like this: Scott wanted to use $40 million in one-time money to buy out both residential and non-residential tax increases. What he can have is $10 million for residential, plus the roughly $4 million or a little over for a total of $14 million. The $26 milllion he can forget about. He might have been able to plead for a little more, but that prospect went glimmering when he waited until five days before adjournment to drop his plan on the Legislature. You don’t try a bush-league stunt like that without paying something for it.
  • The Speaker, Mitzi Johnson, needs to get a grip in a big hurry because she has made the House a public embarrassment. She put herself in thrall to House Republicans at a time when Democrats outnumber Republicans by nearly two to one. Holding an ad hoc caucus with her inner circle and the Republican leadership wasn’t a mistake so much as it was simply bizarre. And trying to freelance her own agreement with Scott with no buy-in from the Senate was sheer incompetence. On the override effort, she couldn’t swing a single Republican; she couldn’t even get all her own votes into the building. Pathetic.
  • What about the House Republicans? They’ve been pretty full of themselves, but their performance really can’t be taken seriously. They voted for the very solid first budget that Scott vetoed, then supported Scott unanimously on the override, thereby propping up the bogus shutdown panic. One of their stalwarts didn’t get the Scott message: he told the press that Republicans knew their position wasn’t about principle or policy, but rather was an effort to get some “juice” in the chamber where they are outnumbered. The juice comment will fit nicely into a political ad. As for Kurt Wright screaming at the beleaguered Mitzi after their little fantasy deal fell apart…Wright has been in government since the Pleistocene—didn’t he wonder why he was getting all that stroking with no Senator in sight?
  • And Scott—didn’t he wonder the same thing? During his little private session with Mitzi, might he have inquired whether Ashe and the Senate were on board? The House members who were not involved in the process and who spent a long miserable day just sitting around, were reduced to wondering whether Mitzi and the Governor had shaken hands.
  • More Scott: the Governor is going to have accept the bill that contains the $14 million/$26 million split with himself on the short end. He is going to have fold, in other words, or he’s going to have to shut down the government. Which I don’t believe will happen. Scott has been bluffing right along. A couple of weeks ago, Susanne Young, Scott’s Secretary of Administration, in a meeting with three House committees, said that the Administration had done nothing all to prepare for a shutdown. That was a hint. Scott and Gibbs are perfectly capable of mounting a political campaign with a lot of misdirection to win some political battle; Gibbs is a specialist at it. But shutting down with no preparation would be hugely irresponsible, and I don’t believe either Scott or Gibbs would do it. The whole bluff idea snapped into focus more recently when agency heads in the Scott Administration assured their employees there would be no shutdown. The Scotties couldn’t say that if that if they didn’t know their boss would accept the best deal he could get.
  • In the short term, there is a pretty clear path to a solution. The House has to pass the Senate bill; if they want to mess with it they will have to have a conference with that body. Then they have to get the agreed-upon bill to Scott today, if they want to give him the full five days to decide what to do with it. The Republicans ought to press for that, since Scott could then let it become law without his signature, a minor conceit that the Governor might like for his reelection posture. Could the whole mess still blow up again? To ask that question is to answer it.
  • The long-term fallout from the current craziness is problematic at best. If my analysis about Scott taking the best deal he can get is wrong, and he vetoes the state into a shutdown, then I think state government could sink into a dark age of rage and recrimination that would make Montpelier resemble President Trump’s Washington. I also think it would presage the end of Scott’s political career. Even without such an outcome, there will be significant angst in the normal process of government. There are a whole range of pressing issues, from school financing to the environment to the underlying performance of the Vermont economy, that can only be worked out by the Administration and the Legislature working in some kind of harmony. That will require a change in style for the Scott Administration. Scott and Gibbs will have to give up Manipulation 101 and accept the reality that they have to use persuasion to accomplish their agenda. And within the Legislature itself, there will be very significant tensions between the House and the Senate. Right now, the House is rudderless and the Senate united, a formula for dysfunction. I can’t even imagine how all that will play out.

Vermont House Has Nervous Breakdown

Can’t anybody here play this game
Casey Stengel, manager of the new New York Mets (c.1962)

by Hamilton E. Davis

   The Vermont House of Representatives, which has been struggling mightily for weeks to cope with Gov. Phil Scott’s veto of their budget and tax bills for the fiscal year beginning July 1, blew up totally in a marathon session last Friday, leaving the issues of school financing, spending for the new year, and the potential shutdown of state government in such a shambles that it was nearly impossible to tell exactly what happened, let alone where the whole mess is headed in the next five days.
   Some things, however, were clear. There is no solution yet to the contest between the governor and lawmakers on using windfall money to eliminate property tax increases for residential property and second homes plus businesses in the state. Scott wants to use one-time money to buy out the increases, a pledge he made in his 2016 campaign. The House and the Senate rejected that idea in their original budget.
   The person primarily responsible for the mess was Mitzi Johnson, the Grand Isle Democrat in her first season as Speaker of the House. Johnson lost control of her chamber so completely that it is hard to see how she can recover her credibility. The Vermont House looked like a particularly unruly eighth grade class that had obtained some inappropriate refreshments.
   The grown-ups in the building over the veto session has been the Senate, although there is considerable irritation at their leader, Tim Ashe the Pro Tem, who can seem petulant when crossed. Petulant or not, however, Ashe has done a superb job of steering his chamber through all the political white water.
   On issue after issue, Ashe has delivered unanimous or nearly unanimous decisions and has pressed them skillfully. And it’s not because the Senate is full of lightweights that can be led around by the nose. Ashe has had to meld the hard left—Sens. Chris Pearson and Michael Sirotkin, moderates like Ginny Lyons and Jane Kitchell, and veteran wheelhorses like the Republicans Joe Benning and Randy Brock, and centrists like Democrats Dick Sears and Dick Mazza—into an effective political unit.
   There is no way to describe the House as an effective political unit. Consider:
   When Governor Scott held back his education tax plan back until five days before the scheduled adjournment, and indicated that he would veto anything that didn’t meet his demands it became clear that his aim was to force the Legislature to eat a very unpopular policy; and further, that he could harry them into submission by threatening to shut down government and blame the Democrats for it.
   The issue in the veto session therefore was not really about the financing issue itself, the question was could the Legislature escape with its self-respect. In the early days of the veto session, Mitzi Johnson and Tim Ashe realized that they had to stick together to survive the political weight of a very popular governor. So they agreed not to negotiate with Scott separately. The held joint press conferences and published a letter to that effect. Their basic job was to coordinate any movement from their position so as to splitting and being picked off one by one. Within days, though, the House discipline began to slip.
   Rep. Janet Ancel, chair of House Ways and Means, announced one day that the Legislature should concede the Governor’s position on the residential portion of property taxes. The cost in one-time money to buy the normal tax increase there is about $10 million. I don’t know whether Johnson knew she was going to do that, but It was clear that Ashe never saw it coming. Scott, of course, instantly said that was not nearly adequate. He also never made a counter offer.
   It was right there that the situation in the House began to go south. Ancel is one of the most experienced and credentialed player in the whole legislature, and in the normal course of the session, her foray would be perfectly normal. But in a veto session, free-lancing like that is a thoroughly bad idea.
   The reason is that you can’t have a budget unless both House and Senate approve it. Ancel had no clue whether the Senate would agree to her proposal, but it was clear that the new starting point for negotiation involved only non-residential property. Ancel had made a big concession on her own. Moreover, the fact that Scott accepted it and demanded more, with no counter offer, raised the very damaging possibility that the House would start negotiating against itself, giving up more and more while getting nothing in return.
   One of the striking thing about this mess is that, in my view, it never would have happened with truly competent political leadership. A speaker like Ralph Wright, for example, would have blown players like Phil Scott and Jason Gibbs out of the water. And you could be sure nobody would be freelancing. If Ancel made her move in a way that embarrassed Wright, she could look forward to moving from the rarefied atmosphere of Ways and Means to the Shrub Committee, the one that meets outdoors. In the current case, it’s hard to blame Ancel because there obviously no leadership coming from the Speaker.
   It only got worse from there. On Friday, well over a month after the end of the regular session, the House was entertaining new amendments like those from Cynthia Browning, a right wing Democrat, Scott Beck, a Republican. Whatever their merits, if those propositions couldn’t get any traction in the regular session, why were they wasting time on the floor at a time like this? And it wasn’t just extraneous amendments.
   The Speaker put together a 10-member ad hoc seminar with five Democrats and five House members to talk over what the House should do. That was simply bizarre: the Republicans, outnumbered two to one, were just a speed bump. The most important fact about the littler gathering was that it had nothing to do with Senate. The Speaker, meanwhile, was negotiating with the Governor on her own—without Ashe. And she thought she had herself a deal; so did Scott. Everybody was happy, happy. But they didn’t have the Senate and once that reality rained on their parade the whole thing fell apart. Following which, Kurt Wright, the Burlington Republican, blasted the Speaker on the House floor, accusing her of all sorts of treachery.
   At that point, full blown panic set in. A late sortie by Kitty Toll, the chair of House Appropriations, failed when Toll herself voted against her own amendment…
   Late in the evening, the Speaker pivoted back to the Senate bill, and got it passed on a voice vote.
   A voice vote? On the budget, the Big Bill, on a voice vote, no roll call? Yup.
   That’s where it stands today. The Vermont House, in full nervous breakdown mode, will try again to find its way out of the wilderness. The key question is whether they will grasp the essential reality that no budget can pass that has not been endorsed by both chambers.
   And they have to get it done today, if Scott is to have five full days to react to it. If passed today, Scott will be able to let it become law without his signature. That ought to focus the minds of the House Republicans, who would have to vote in favor of quick action. Will they? Who knows? Their leadership has been as much of a joke as that of the majority.
   The circus tent opens at 10 a.m. Get your seats early!

N.B. Given that the above screed is a bit scrambled, I’ll post my own takeaways from Friday’s performance in a few hours.

Big Choice for the Vermont Legislature: Real Part of Government or Doormat

by Hamilton E. Davis

   The whole Vermont school finance-government shutdown ceased to be about substance on May 1, when Gov. Phil Scott dropped his real plan in the lap of the Legislature, and told them to adopt all of it or he would shut the government down--and blame them for it. At that point it became clear that Scott intended to achieve his policy goals not by any normal governmental process, but by turning the Legislature into a rubber stamp.
   Scott said then and has said many times both before and since that he wants to “work with” the Legislature, and that the whole matter is very easy to solve if lawmakers would just do what they obviously should do, instead of being “political.” On Tuesday of this week, Scott’s top aides reiterated the whole argument, and noted in addition that they have done nothing to prepare for a shutdown. No need to, they said in effect, since it would be so simple for the Legislature to give them what they want.
   The fertilizer content of that whole proposition approaches 100 percent. Consider: on January 18, Suzanne Young, Scott’s Secretary of Administration, sent a memo to the Legislative leadership laying out 18 suggestions that lawmakers might consider and pledging to cooperate in that process. The memo was not accompanied by any draft legislation, a normal component of government process, and none was forthcoming over the following three and a half months while the Legislature was crafting the General Fund budget and the tax machinery to pay for it. During that time, a steady stream of grumbling emanated from the key legislative committees, particularly House Ways and Means, led by Rep. Janet Ancel; and House Appropriations, led by Rep. Kitty Toll. Both committees complained that they had trouble getting necessary data from the administration; they also fretted over the fact that they were not seeing a proposed “plan” or legislative language from Scott’s minions.
   Then, on May 1, with one week left to go before the scheduled adjournment date and work on the major bills virtually complete, Scott sent the Legislature his demands on the school tax issue and let it be known that he would veto a budget that didn’t include his plan. One week.
   That’s it, right there, the reason for the above conclusions. Nothing like that has ever happened in Vermont before. All Vermont governors maneuver as best they can to achieve their goals, but none has ever threatened to shut down the government to get their way. Moreover, it was the second time he was using that kind of caper. He got his way last year the same way. And while the public is unlikely to understand it, if Scott succeeds again he will turn the Legislature into a governmental joke.
   It is certainly possible that the Scott strategy could be employed in the service of truly superior public policy, but that is not what is happening here.
   The content of the school financing issue is important and has been vetted at length in the press, and in this space. The Scott plan and the budget passed at adjournment are both plausible, but the Legislature’s effort to avoid using one-time money is clearly superior to Scott’s.
   The evidence for that conclusion can be seen in years of Republican advocacy, which explains why the Republicans voted for it in large numbers. An exceptionally clear statement of that position can be seen in the recent commentary in VtDigger by John McClaughry, an industrial strength Republican policy analyst.
   The conclusion I draw from this is that Scott’s strategy to reach his policy goals is far more important than the content of the goals themselves. The Legislature has already agreed, in effect, to give Scott half of what he has demanded—flat taxes for Vermont homeowners. The value of the second half of the loaf—flat taxes for second home owners and businesses—runs to a few million dollars in a General Fund budget of roughly $1.5 billion. So the money is not a big issue, at least nowhere near important enough to shut down the government. 
   What is a big issue is the fact that Scott is using damaging methods to force compliance with a clearly unpopular policy. That kind of scorched earth, partisan tactic has been a cardinal feature of the collapse of American politics into a toxic miasma that hangs over the whole country. Scott is bringing it here.

The Question Now: Will the Legislature Hold or Fold?

   Impossible to tell. The Legislature will meet tomorrow to attempt an override for the latest iteration of the budget. An override is unlikely, but not impossible. Republicans have rallied behind Scott in the post season, but some could begin to remember that they voted for the regular session budget, and that, as members of the Legislature, they also have a stake in avoiding emasculation.
   A personal observation: a friend with long experience went to southern New England a couple of weeks ago and found his Vermont ex-pat pals atwitter about the possibility of a government shut down. “Won’t happen,” he assured them. He came back three days later, and changed his mind. “I don’t see how they avoid shutdown,” he said.
   One reason I think his insights are so compelling is that they match mine. I’ve gone back and forth three or four times between 40/60 shutdown and 60/40 no shutdown. The market value of this kind of speculation runs perilously close to zero.
   There are some certainties, however. One is that the whole Legislature, and particularly the House and Senate leadership, understand exactly what is happening. If you push their interview buttons, they can lay out an hour of reasons, basically all valid, about how they are being mistreated by Scott. In recent days, Tim Ashe, the Chittenden Democrat/Progressive who runs the Senate as Pro Tem, did just that in interviews on Channel Five T.V.  I talked with the Speaker, Mitzi Johnson, a few days ago. “Scott is treating us like his staff,” she said, before launching into a recitation of the Scott behavior over the last five months.
   Understanding what is happening to you, however, is far from doing something about it. And there the whole issue starts getting squishy. The fact is that the squishy syndrome is hard at work in the current environment. In both chambers, there are legislators who just can’t imagine a shutdown. Will the state parks be open on the Fourth of July? How will people get paid? “It’s our responsibility.”
   It is easy for outsiders, including your correspondent, to say that it’s just as much Scott’s responsibility, which is true, but that doesn’t make it easier. On the basis of what he says, Scott is willing to be irresponsible; but some will see a firm stand as matching irresponsibility to irresponsibility.

   A couple of final thoughts:

   Some of the very knowledgeable and experienced people I have talked to don’t think that Scott would shut down the government. That, in other words, he would accept the best deal he can get. I suspect that is true, but we will only find out if the Legislature holds…
   A second supposition is that the political consequences of this decisions are more complex than normal. I’ll comment more on this issue if it is still relevant after tomorrow. For now, I would just point out how asymmetrical the political landscape is. Scott is lined up against the Democrats as a body, but he doesn’t have a serious Democratic opponent in November. At the same time, while he may be able politically to hang a “Kick Me” sign on legislative Democrats, they only run locally. Who, I wonder, are the lucky Republicans who get to run against Tim Ashe in Chittenden, Kitty Toll in Danville, Janet Ancel in Plainfield…to ask the question is to answer it.
   So, uncertainty prevails. Twelve days left to the dawn of Fiscal Year 2019. Those 12 days are critical for Vermont, for the immediate future, and for the long-term future, to an extent we have never dealt with before.

Forget a Compromise, One Side Will Cave

by Hamilton E. Davis

   Over the last couple weeks, the administration of Republican Governor Phil Scott and the Democrat-dominated Vermont Legislature have moved even closer to the brink of a catastrophic shut down of state government, a move that would damage Vermont’s credit rating and dig a political and financial hole that could take years to crawl out of.
   The issue that led state government into this mess is the financing of elementary and secondary education. Wading through the morass of legislative and executive back and forth is onerous at best, but broadly speaking there are both substantive and purely political issues in play. I took a crack at them in my post on May 30, and concluded that the real responsibility for the mess belongs to Gov. Phil Scott and his chief of staff, Jason Gibbs.
   On the question of whether the administration position or that of the legislature represents the sounder public policy, I have decided to publish in its entirety a commentary by John McClaughry, a long time public policy and political analyst from Kirby, VT. The piece was originally published by VTDigger and is reprinted with John’s permission.
  Why McClaughry? Well, I am known to my tiny, rigorously selected corps of brilliant readers as being of the Democratic persuasion, and McClaughry is the polar opposite. We disagree all over the place, and I consider his political philosophy to be frozen somewhere in the second Jefferson administration.
   But McClaughry is smarter than any half dozen Republican bigfeet you can think of, he is absolutely lethal when it comes to the intricacies of public policy and he is cussed enough to wield a bipartisan shillelagh. I suspect him of enjoying bashing Democrats more than Republicans, so when he unloads on the Scotties, I take it seriously. Give it a look.  If you’re still unsure about McClaughry, you might consider that President Ronald Reagan considered him valuable enough to bring him into the upper policy realms of the most conservative national administrations in the modern era.
   Enough of the substance. The issue now is a brutal political struggle that Scott has elevated to a possible government shutdown, and an existential struggle with the Legislature about how government will work in Vermont. So far, Scott has been winning pretty easily, but I am beginning to think that the wind is shifting. We’ll know for sure by July 1.
   Here is the way the playing field looks to me now:


   Virtually all the action in the override session has taken place in the House. Part of the reason for that is budget and tax legislation, in Vermont and everywhere else, starts there, by tradition if not by constitutional fiat. The Senate has been quiet, but that can be deceiving. Sen. Tim Ashe, the Chittenden D/P serving as President Pro Tem, has his chamber under firm control; whereas Speaker Mitzi Johnson has struggled to manage the House. Keep in mind the underlying assumption here: that the contest now is mainly political, not substantive.


 The action so far has been a series of strategic retreats before the Scott shutdown threat. The budget/tax bill that passed before the Legislature adjourned essentially left in place the property tax increases driven by the school budgets passed earlier in the year by local communities and school districts. The increases were of two types; one rate covers residences; the second covers second homes (non residential) and businesses.

Scott demanded that the Legislature use windfall, one-time money to eliminate tax increases in both categories, Res, and non-Res in the shorthand. So, herewith the play-by-play, following the veto of the first budget:

1.      The House offers to separate the school financing aspects of the budget from the remaining costs of running state government, so that government would not shut down. Scott says, No Way.

2.      Rep. Janet Ancel, the chair of Ways and Means, recommends a major move toward Scott by proposing to use one-time money to eliminate the residential increase, while leaving the non-residential increase in place. Scott says, No Way.

3.      Cynthia Browning, a Democrat from Arlington in Bennington County, proposes to use the one-time money General Fund money to buy out the entire property tax increase. She would rewire the financing mechanism somewhat, and insist on eliminating state control over such administrative functions as class size. On the money issues, however, the Browning thrust amounts to a total capitulation on the part of the Legislature to Scott. And just to make it a little worse, she supports the Scott contention that it is the Legislature that is responsible if state government shuts down. Browning’s proposal gets some interest from and vetting by Ways and Means, but does not get into a bill, at least not yet.

4.      Throughout this process, Scott has not moved a millimeter, and his apparatus, his staff and particularly his press secretary deliver a steady stream of harsh comments about the way the Legislature is doing its job.

5.      On Friday of last week, the House and Senate sent Scott another budget, one that incorporates the Ancel initiative—residential homes would not see a tax increase, but  the second home and business tax hikes remain in place. That bill has been passed by both chambers. Scott is virtually certain to veto that measure today.

   That’s where we stand now, with the players and particularly the press waiting to see what the ‘”compromise” will be.
   My own view is that there won’t be a compromise at all. Scott has talked himself into a corner by refusing to move at all from his all-or-nothing demands. If he accepts the half-loaf on the table—Just letting the property tax increases go through on non-residential property and businesses—he’ll look silly, particularly to that portion of his base that already dislike his stand on issues like guns and marijuana.
   Scott’s intransigence, meanwhile, has forced the Legislature into a very serious box. Their original budget was a perfectly sound piece of work, whose overall numbers came in below Scott’s targets and had overwhelming bi-partisan support; in the Senate, every Republican voted for it.
   Scott’s magisterial refusal to move at all has put the Legislature in a position where the real issue they face is whether they can escape with their political self-respect in place, given their own belief that the public will blame them for a government shutdown.
   By this reasoning, the only real path forward is for the Governor or the Legislature to hold or cave in to the other. That would not be a compromise—it would be a very serious blow to the side that caves.
   There is no way at this point to guess which way the contest will go. But there are some interesting straws in the wind.
   I’ll look at those in my next post.

The School Property Tax Deadlock

Editor's note: John McClaughry is a conservative policy analyst at the Ethan Allen Institute.  This article is reprinted from VTDigger by permission of John McClaughry, the author.

   Gov. Phil Scott and the Democratic-controlled Legislature are well into crunch time over the FY 2019 state general fund budget and the related education finance bill.
   The governor obviously takes very seriously his 2016 campaign pledge to hold state general fund spending to a growth of 2.36 percent a year, and to oppose – and veto – any increase in tax rates. However, the actual homestead school property tax rates are not set each year by the Legislature and the governor. They are determined district by district based on each district’s spending per equalized pupil. The total tax dollars thus raised, when added to other specified revenue sources, must add up to the sum of all the voter-approved school budgets.
   Last year the governor (enthusiastically) and Legislature (unhappily) agreed to grab more than $40 million from various accounts and reserves, and put that into the education fund to produce a slight reduction in homestead school property tax rates. That was effectively an internal loan that has to be repaid this year.
   On May 1, two weeks before adjournment, the governor unveiled a sweeping new plan for curbing education spending and keeping homestead property tax rates flat.
   His plan promises to deal with a financing gap of $236 million over the next five years. It proposes to appropriate between $44 million and $58 million in one-time funds to replenish the now-depleted reserve funds and keep the homestead property tax rates flat for the coming year. The governor has apparently forgotten (again), that in his 2016 campaign he promised “We need to stop using one-time money to plug reoccurring budget holes.”
   The administration’s plan promises “nearly $300 million in savings” over the five year period. Reviewing the governor’s projections, the respected, nonpartisan Joint Fiscal Office fairly concluded that “the administration’s 5-year outlook is a mathematical exercise only: their analysis does not indicate specifically how this ‘gap’ will be closed.”
   The big ticket in the administration’s proposal to save the $262 million is “increasing student to staff ratios” in Vermont schools, ultimately (and supposedly by attrition). This is mathematically attractive but not credibly achievable unless the state seizes control of the schools.
   When the administration floated the idea of imposing fines on school districts that didn’t meet its 5.75 to 1 ratio test, it vanished within about two days. In truth, nobody can accurately predict just how districts would react to the mandate and associated penalties, and thus how much spending would be saved.
   A special education law enacted earlier this year could – possibly – produce some savings, but no one knows how much, because no one knows how the school districts will choose to make use of new flexibility, and how often service reductions will be challenged by plaintiff lawsuits.
   Establishing a statewide teachers’ health insurance program could, depending on its terms, produce savings, but no one knows what the terms of such a program would be. The governor also plans to spend some of those savings, if any, on preschool, state colleges, and technical education.
   What this comes down to is whether to put $34 million (or $58 million) from available one-time revenues into the education fund to keep homestead school property tax rates flat, and rely mainly on mandated student to staff ratio increases to produce enough “savings” to keep them flat for five years (Scott’s proposal); or letting the homestead property tax rates rise by maybe two cents to reflect increased school budget spending, while using much of the one-time revenues to pay down the enormous long-term liabilities ($2.4 billion) of the teachers retirement and health benefit funds (the Democratic proposal).
   To their credit, the Democrats have worked conscientiously to be fiscally responsible. They rightly believe that the governor’s projection of marvelous “savings” over five years, essential to holding the line on homestead school property taxes, is speculative at best. They also responsibly oppose, as Scott himself did two short years ago, using the one-time funds to hold down tax rates for one more year. Their recommendation for using those funds is to slightly but symbolically reduce the liabilities of the teacher retirement funds.
   The problem the Democrats face is that most homeowners badly want property tax relief, and are not very receptive to appeals for sound fiscal practice. It is after all an election year, and if Scott’s proposal prevails, his strong suit in November will be that “he stopped rising school property taxes.”
   At this writing, the resolution of the school finance issue, and thus the vetoed budget, has not taken shape. What does seem almost certain is that the terms of any resolution this month will produce exactly the same problem next year, when there’s no reason to believe that significant one-time funds will appear to cover another education fund shortfall.

The Scott Paradox: Political Courage and Political Bullying

by Hamilton E. Davis

   These are sad, even poignant days for people who pay attention to and care about state government in Vermont. Sad because Phil Scott, a very popular new governor, is making a total hash of the management of the state’s finances, poignant because that fact contrasts so strikingly with his stand on gun control, one of the most courageous political decisions I have ever seen.
   When it became clear how close Vermonters had come to a mass school shooting earlier this spring, Scott immediately shifted his earlier position in the most candid way possible. When he met the press, he described how he had always assumed that gun problems had no relevance to Vermont; but that he had looked into the abyss when he saw the details of the Fair Haven case and realized that Fair Haven would have been on a scale with the recent school shooting in Parkdale, Florida.
   Many politicians would have said the same, and most of them would have signed onto stuff like more checks for guns sales, and increased security measures. But Scott went right to the very heart of the whole gun issue when he supported limiting high volume magazines, 15 to 30 round devices that seem to appeal particularly to the troubled young males that have been shooting up American schools and other places people gather.
   It was the high-volume magazine issue that touched off the continuing rage of some of the Vermont gun community, but that didn’t deter Scott at all. He signed the gun bill outside the State House with 300 or so gun people howling bloody murder at him on the lawn. Scott just stood up and took it--a historic act of political integrity.
   Which makes it puzzling why Scott is making such a mess of managing the state’s business. The current impasse over the financing of the state’s elementary and secondary schools is just the latest example. The principle underlying the operations of government is that the executive and legislative bodies are co-equal branches of that government.
   Scott talks about it, however, as if he thinks that the executive makes the decisions, and it is the duty and obligation of the legislature to endorse them. That would make Scott a king, not a governor. It’s not like most governors do not try to out maneuver their legislature so as to achieve their policy goals. But in the past, governors of both parties understood that they do not control the other branch, and, moreover, they work very hard to buttress their goals. For example, Vermont governors in the modern era routinely begin working on the following years budget very soon after that year’s legislation winds up. Their staffs are well into it by summer and when the new legislature arrives in January, the administration knows the new budget inside and out.
   That was just the first step, however. Their budget guys especially spent the whole legislative session shepherding their document through the money committees, House Appropriations and Ways and Means; Senate Appropriations and Finance. They would shadow the key legislative players from the first day to the last, constantly working to iron out kinks, and resolve differences. The ultimate failure of such an effort is a gubernatorial veto. And those failures have been very rare.
   The way Scott runs his government is a very significant departure from his predecessors of both parties. He has basically turned the locus of decision making over to his chief of staff, Jason Gibbs, and the Gibbs strategy clearly has been to out-maneuver and bully the legislature, and, in effect, to Invite them to like it or lump it.
   For the second year in a row, Scott has waited until the last few days of the session to drop a major policy demand on the lawmakers, and then made it clear that he would veto any budget that didn’t fall in line with those demands. The issue Is how to deal with the financing of the state’s elementary and secondary schools—the details are complex and have been laid out in the press. From a 30,000-foot perspective, however, the situation looks like this:
   Both the Scott proposal and the budget passed by the Legislature are plausible ways to proceed. There is a strong consensus across both parties, however, that the Legislative plan is superior public policy.
   You can find evidence to support this view in the response of the Republicans to the Scott ploy. The Senate, including all seven Republicans, supported the Legislature’s budget unanimously; and one of the GOP’s more important players, Randy Brock of Franklin County, made it clear in comments to the press that he was surprised at how far the Legislature had moved in the effort to render the document acceptable to Scott. Then last Wednesday, a group of House Republicans floated a compromise bill of their own, an indication they think the Governor is overreaching.
   Yet, the administration and the Legislature are sliding steadily into an impasse that could shut down state government on July 1. So, it is critical for everyone concerned to consider what the implications are in the next few weeks for the way state government is going to function in the Scott era. Right now, it doesn’t look good. And the major reason is that Scott doesn’t seem to really understand how government works. I just don’t believe that the Scott who faced down the gun mob, a good guy with more sheer guts than a busload of standard politicians, would operate this way if he did. Jason Gibbs would, but he has disclosed himself over the last year as a reckless partisan who delights in tormenting a Legislature that he knows is irretrievably stacked against his party.
   So, a major question: will Vermont have a Scott government, or will it just be “Douglas lite.” I say Douglas lite for two reasons. One is that Gibbs made his bones as press secretary for former Governor Jim Douglas during the ‘oughts; and the Douglas playbook included all sorts of maneuvers to disadvantage the Legislature, including sorrowful ruminations on how his opponents in the state house didn’t really represent the “Vermont Way.”
   At the same time, however, Douglas had an amazingly fine-grained understanding of how government works, and he was anything but reckless. Gibbs working for Douglas was one thing. Gibbs actually running the Scott administration is quite another. Hence: Douglas lite.
   It may seem presumptuous to suggest that the Vermont governor doesn’t understand, but that’s the way it looks. Consider: he tells the Legislature that he “wants to work with” them; but that isn’t what his administration does. He drops a ragbag of 18 to 20 ideas on lawmakers early in the session, and then lets them begin working on the issue with almost no input—until the very end of the session. Then he announces what his “non-negotiable” positions are, and he makes it clear that he will veto anything else.
   When the veto session convened last week, the Legislative leadership—the Speaker, Mitzi Johnson and Senate President Pro Tem Tim Ashe—held a press conference ln the Speaker’s office. The main line of questioning ran along the lines of: the Governor’s non-negotiables are such and such—what are your non-negotiable demands?
   To their credit, Ashe and Johnson refused to get sucked into that game. The budget is a negotiation and that makes it different from all the other issues that animate a legislative session. If the players on both sides of a question have non-negotiable positions, not much real negotiating is going to go on. On all the other issues, the Governor has pretty much an impregnable position, assuming he has enough votes in at least one of the two chambers to sustain a veto; Scott has such a potential blocker in the House. So Scott can veto any bill the Legislature passes, and he is acting as though that is true of the budget. The budget, however, is unique because government can’t operate without it.
   Scott appears to believe that the legislature has to send him a budget he is willing to sign. It’s true of course that we can’t have a budget if the Governor won’t sign it. It is equally true, though, that we can’t have a budget that the Legislature won’t pass. So, in power/responsibility terms, the executive and the legislature are exactly equal, 50, a decimal point, and two miles of zeros, They have precisely equal power and responsibilities on that issue.
   What that means is that the resolution necessary to have an operating government on July 1 devolves to a political question. Either one side caves between now and then, or government shuts down, and the public has to decide who is responsible and who should pay the political price for the damage and dislocation that occurs.

Managing that calculus is the nub of the next several days.

I’ll look at that issue in my next post.

State-funded Primary Care is a Bad Idea

by Hamilton E. Davis

   For the last few years, the Vermont legislature has been wrestling with a marvelously attractive, utterly pernicious proposal to solve the state’s primary care doctor problem at a stroke by shifting financing of the system to state government. The idea was that the state would levy a payroll tax on employers, and use the money to pay primary care doctors to care for all Vermonters at no cost to individuals.
   The initiative came from Dr. Deb Richter, a primary care doctor who lives in Montpelier and who has been a strong supporter of health care reform for more than a decade. Richter came up with her proposal in the wake of then-governor Peter Shumlin’s decision in 2014 to drop the financing component of the single payer reform proposal he launched in 2011. The cost containment component of the Shumlin project continued and is well advanced today,
   The Richter proposal bounced around for a couple of years, was studied in some depth late in Shumlin’s tenure, and then resurfaced in the current legislature. No one gave it any chance of actual enactment, however, because of the determination of the new Republican Governor, Phil Scott, to oppose any new taxes. The bill forwarding the Richter proposal is all but technically dead.
   The whole exercise is worth examining, however, because the issue of primary care is vitaI to the reform project and the performance of the Legislature in dealing with it in the recent session indicates that important elements of that body still don’t seem to understand it. Both health policy committees, Senate Health and Welfare and House Health Care, supported the UPC bill, despite the fact that Al Gobeille and Michael Costa of the Agency of Human Services testified that the whole thing was bad for the system. The key member of the Legislature to get it right was the Senate President Pro Tem Tim Ashe. Ashe, a Chittenden County Democrat/Progressive, who has taken considerable heat in this space for his posture on reform, effectively steered the whole state-paid primary care scheme into the weeds. He apparently has more work to do with some elements of both chambers.

So, Why is Universal Primary Care a Bad Idea?

   It is worth noting at the outset that the idea of removing financial barriers to Vermonters receiving primary care is a commendable impulse. The difficulties with the Richter scheme are essentially practical ones that arise in a way it would affect the management both of primary care itself as well as the overall system.     
   The central problem with the initiative is that it would damage and possibly kill the state’s health care reform effort, which is moving forward steadily. The centerpiece of the reform project is shifting payment to doctors and hospitals from fee-for-service to block financing, or capitation. That shift is embodied in contracts between a group of providers, acting through a device called an Accountable Care Organization (ACO), and payers, such as Medicaid, Medicare and private insurers, to provide all the care necessary to blocks of patients for a fixed price.
   The underlying principle for that process is the integration of the health care delivery system from primary care to more complex secondary care, much of it in hospitals, and to tertiary care that is delivered in our region by the University of Vermont and Dartmouth academic medical centers. Modern medical care is so complex, and so expensive, that patients need to move seamlessly up and down the intensity ladder in order to achieve the lowest cost and highest quality.
   Carving primary care doctors out of that system and paying and managing them differently from the rest of the system just doesn’t make any sense. An immediate problem is that the carve out would encourage primary care doctors to refuse to attribute their patients to the ACO, and thereby constrain or even block the application of the reform template to Vermont hospitals, which now spend 95 percent of the acute medical bill in Vermont.
   That is not a theoretical concept; it is a practical problem on the ground today. Rutland Regional Medical Center, the second-largest hospital in the state, and the most expensive one on a per capita basis, lies outside the reform project. The reason is that the FQHC in Rutland refuses to attribute any of its patients to the ACO, so OneCare has no fixed price contract with Rutland Hospital.
  The same dynamic is at work in the hospitals serving the Morrisville, Randolph, and St. Johnsbury areas; and similar FQHC reluctance is holding down the participation numbers in the Burlington and Bennington hospital service areas. That could change, of course, and even if it doesn’t, the Green Mountain Care Board is actively considering changing the attribution rules so that patients could be attributed to ACO by area of residence or by receiving treatment in a specific hospital. The UPC idea would still be highly problematic.
   How to manage the whole thing would be nightmarish. The Deb Richter template was based on a panel of 1,200 patients per primary care doc, with the state paying $500 per patient. Richter reasoned that if a doctor’s patients were unhappy with his or her perfomance, they could just leave—vote with their feet. Still productivity could be a challenge. Anyone who doubts that could consider the case of Porter Hospital, which ran onto the financial rocks, mainly because of low work loads by its primary care docs and had to give itself to the UVM system.
   A second critical problem, in my view, is that splitting the financing of primary care doctors from the rest of the system could be very damaging to primary care doctors themselves. Primary care docs have been disrespected in the system, and underpaid as well, for decades. From that perspective, getting a reasonable payment from the state looks like a pretty good idea.
   The problem is that while the payment might look good in Year One, whenever that might be, the years after that are certain to get worse and worse. The larger system, the hospitals and a majority of the total docs, will be able to demand that they get paid an inflation rate near three percent per year. There is, after all, a reason that they get 95 percent of all the acute health care money now.
   Every new penny going to a state funding mechanism for the remaining five percent would have to come through the Legislature’s appropriation process. And there is no way on God’s Green Earth that the primary care docs, on their own, will have enough political weight to match up with the much larger system. The primaries might get a three percent bump in a year when the state is awash in money; but the state is seldom awash in money, and the demands facing the annual spending are ferocious.
   What would be much smarter in practical terms would be to take advantage of the favorable political forces for primary care in the reform environment, and work to get their fair share of that huge main flow of money. They will be able to do that only by embracing the whole integration principle, rather than isolating themselves from it.
   The primary care docs themselves might figure that out on their own, even though it was apparently a mystery to the House and Senate health policy legislators.

GMCB Loses Top Finance Staffer

by Hamilton E. Davis

   Andy Pallito, the top numbers guy at the Green Mountain Care Board, is leaving the Board after just nine months on the job. Pallito will take a finance position at the Community College of Vermont. He will leave the GMCB in mid-March.
   Pallito will become Dean of Administration for the 12-campus unit of CCV, which operates under the umbrella of the Vermont State Colleges. “It was a fantastic opportunity that I just could not pass up,” Pallito said. “And it will round off 26 years of service in Vermont state government.”
   The loss of Pallito, coming as it does in the formative days of the Fiscal Year 2019 hospital budget season, is a serious blow to the Board. The budget process is particularly complex this year because the Board has to integrate its normal regulation of spending for the State’s 14 hospitals with the first full year of OneCare Vermont’s program to shift the financing of health care from fee-for-service to capitation.
   OneCare Vermont, the state’s only Accountable Care Organization, will function as a consortium of doctors and nine of the 14 hospitals that will offer care to roughly 20 percent of the state’s population under fixed price contracts with the State’s Medicaid agency, federal Medicare officials, and Vermont Blue Cross.
   The most important of those contracts is the one with Centers for Medicare and Medicaid Services, which administers the federal Medicare program. Beginning this year and extending out five years, Vermont’s health care delivery system is committed to hitting cost containment targets that are lower than federal Medicare trends across the country. The key element in that equation is spending by Vermont’s hospitals.
   Pallito’s first year covered just the latter portion of the budget year, which begins now with guidance from the Board to hospitals that are drafting their spending plans. Those plans must be submitted to the Board by July 1; and the Board has to announce its final authorizations by Oct. 1.
   Kevin Mullin, the chair of the Green Mountain Care Board, will have to scramble to find a replacement. And there are some indications that it won’t be easy. The decision by Governor Phil Scott to cut three members of the Board’s 28-member staff, and Mullin’s routine acquiescence in it have generated a serious morale problem at the Board. I wrote about that in my last post. (L-link). Mullin has to hope that Pallito is the last shoe to drop, not the first.

Cutting GMCB Staff is a Very Big Deal

by Hamilton E. Davis

  In my last post, I raised the question whether Gov. Phil Scott’s administration could be maneuvering to somehow get rid of the Green Mountain Care Board, whose job is to recast the Vermont health care delivery system. I think the answer to that is no; the administration knows that it cannot do that without causing a politically dangerous mess. I think what it is doing is cutting the bone and muscle of the Board to the extent that the Board can’t accomplish what it was designed to do. And Scott wants to do that without suffering any political damage.
  Scott’s budget team has told the Green Mountain Care Board that it needs to cut its roughly $8 million budget by about $250,000. Budgets get cut all the time, of course, but it is striking how short sighted this effort is. The first thing to understand is that only 27 percent of the Board’s budget comes from the General Fund, which is about $1.8 billion. That means that the quarter million dollar cut to the Board’s budget will save only about $75,000 for the General Fund. In other words, an 11 percent cut in the Board’s already small staff will generate a savings to the General Fund of just four one thousandths of one percent.
  It gets worse. The way the rules operate, the only way the Board can make the Scott-ordered cuts is to lay off staff members. Moreover, the rules dictate that staff members who are on a sort of temporary employment have to go first. In the current case, the three employees slated to lose their jobs aren’t some minor leaguers operating on the fringe of the staff operations; they are highly skilled people who will absolutely be needed to meet the huge challenges facing the Board as it shepherds the country’s leading health care reform project through uncharted waters.
  For example, when Susan Barrett, the chief of staff, and Kevin Mullin, the chair of the Board, testified in the Legislature about the cuts, Barrett said in answer to a question that two of the members on the chopping block had done the major part of the staff work on the Board’s survey of primary care doctor attitudes in the state about reform. This survey resolved some of the most contentious issues surrounding the role of primary care in the state. In fact, the survey blew up a thoroughly malignant effort in the Vermont Senate to drive the Board in a direction it clearly didn’t want to go. 
  The survey was conceived and designed by Jessica Holmes, a Board member whose day-job is as professor of economics at Middlebury College. Important elements of the work, however, were carried out by the staff, and that kind of thing will become more important as the health care delivery system enters a fully elaborated reform phase. 
  There is yet another dimension to this issue. When asked about the whole cut issue, the chair, Kevin Mullin, replied:

  It’s no big deal. We will be able to do the work we need to do with the staff we have left, and we will have been stewards of the taxpayer’s dollars.

  That response ran pretty high on the obtuse meter. An 11 percent cut in an elite, but very small staff is in fact a very big deal, both in the staff’s ability to perform its particularly difficult mission, and in the morale and esprit de corps that animate such a team.
  The morale problem doesn’t lie so much with the staff members who are gone, but with those who are left. The Green Mountain Care Board badly needs the staff experts that it has recruited and trained to a high level; and if they conclude Mullin won’t have their back under pressure then they could just leave—many of them for multiples of the salaries they get today.
  It isn’t clear yet how all this will play out. There is already a bill in the House that would reverse the cuts ordered by the Scotties to the Green Mountain Care Board, and to some other elements in state government . I have no idea yet whether that bill will have legs; far more bills are written in the House than get a hearing, let alone passed. So perhaps the Legislature will step into this issue.
  What is now perfectly clear is that Scott is prepared to make very damaging cuts to a very small body that is managing not just an industry that spends far more than the state budget itself, but produces 20 percent of the whole state economy. The term “false economy” was coined precisely for situations like this.

Does the Scott Administration Want to Kill the Green Mountain Care Board?

by Hamilton E. Davis

   Vermont is now a little over a month into the first full year of its health care reform’s execution phase, and things are moving along fairly smoothly, at least as smoothly as one might expect for such a fraught public policy enterprise. The Green Mountain Care Board has cut the historic rate of annual hospital budget increases in half, and OneCare Vermont is expanding its 30,000-patient 2017 Medicaid base in northwest Vermont to roughly 122,000 Medicaid, Medicare and Blue Cross patients across much of the rest of the state. So far, so good.
   The Legislative session, meanwhile, is in full swing, accompanied by no more than the normal angst. The House Health Care Committee is continuing its efforts to figure out how the system is supposed to work; the Senate is working on legislation to permit importing cheap Canadian drugs, a good idea; and whether to shift all primary care financing to a state tax, a terrible idea that will attract a ton of feel-good support, but which is certain to run into Governor Phil Scott’s core governing principle—no new taxes. None of this activity is directly related to the way the reform project actually works.
   Underneath this relative tranquility, however, powerful anti-reform currents are at work that pose a real threat to the Vermont project. One such current is the lack of effective political leadership for reform in either the governor’s office, or in the Legislature. The second is the reluctance of a significant minority of primary care doctors in the state to accept the proposition that the delivery system needs to be restructured. (That, in fact, is the source of support for so-called Universal Primary Care, now on the table in the Senate). The tiny corps of adepts that constitute my readership will recognize that I have written about the issue of political leadership before; I return to it now because it has moved closer to the surface, and, moreover, because there is a new target—the Green Mountain Care Board itself. That constitutes real danger: the success of reform in Vermont depends on the intricate dance between OneCare Vermont, and by critical extension, UVM, and the Green Mountain Care       Board. Both of those players need to bring their A games every day or the project could be crippled. The hard question now is how to assess the threat…

The Mike Smith Caper

   A few months ago, Governor Scott nominated Tom Pelham, who served as Tax Commissioner in the Dean and Douglas administrations, to fill the vacancy on the Green Mountain Care Board created by the retirement of Con Hogan. Pelham had spent the Shumlin years in the governmental wilderness and during that time he published some commentary on state financing from a fairly conservative perspective.
   In the light of that background, the advocacy group Rights and Democracy urged the Vermont Senate to refuse to confirm Pelham for the Hogan seat. The advocacy group cited three Pelham commentaries in VTDigger and The Rutland Herald; these touched on health care reform, but their main thrust was a critical riff on the spending proclivities of state government, especially the Legislature. I count myself among those who strongly support the Vermont health care reform project, but I could find nothing in any way unreasonable, factually wrong, or poorly argued in these articles. In any case, Pelham is now sitting on the Board and is certain to be confirmed.
   There is no way yet to tell where Pelham will come down on the substance of the issues before the Board. He could turn out to be bent on undermining reform—or not. My inclination is to take him at his word that he supports the All Payer Model, the litmus test in the reform era. The deeper significance of the Pelham issue in the near term is not so much his appointment as some of the reaction to it.
   I am referring here to a column written for VTDigger by Mike Smith, who also hosts a radio program on policy and political issues. (He recently retired from his commentary gigs)  Smith’s direct political experience was as Secretary of Administration in the Douglas administration; in that capacity he was Tom Pelham’s boss. He was also a close colleague of Jason Gibbs, who served in several key posts under Douglas and who now serves as Chief of Staff to Governor Scott. Smith is not just a talking head, Smith is connected. So, it’s worthwhile looking closely on what he wrote. 
   Smith’s argument runs along these lines: the Green Mountain Care Board was created to “oversee and regulate the state’s planned single-payer health care system” and as a means toward that end was empowered to recruit a fully elaborated technical and policy staff. Smith asserts that the death of the financing aspect of single payer has so changed the reform environment that the mission of the Board needs to be significantly recast, and while Smith doesn’t say this directly, downgraded…some of his commenters on Digger interpret this, accurately I think, to mean the Board should be repealed. In fact, there is now  a bill in the House that would repeal the Board, although no action on that is likely. 
   Irrespective of this last point, the real issue is whether the Board is doing what it should be now; in other words, whether Smith’s assumptions are valid. In my view, his assumptions are totally and demonstrably wrong. He has a right to his opinions, of course; and it’s not as though he doesn’t have company. Spend some time in the Senate and House health care committees and you will see very quickly that there is considerable opposition to the reform track the state is on. And it isn’t just in Vermont: much of the national press gave up on Vermont reform when the financing side went away; so did at least some of national health policy community.
   So, Smith and these other policy players are all wrong? Yes, precisely, totally. Herewith the case:
   The first single payer health care system in North America debuted in Canada in 1984. The going-in system was fee-for-service with multiple payers. In their new system, the Canadian national and provincial governments picked up all the costs, and raised the money through taxation. At the patient level, the care was free. The structure of the hospital system remained the same: doctors and hospitals competed with one another and got paid per episode of care.
   In 1984, the Canadian delivery system had excess capacity, more hospital beds and doctor availability than they needed. Within months the huge demand kicked off by the new financing system blew through the excess capacity and the Canadian system began to impose constraints on access to the point where it had some of the worst access in the western world.
   So, when the Shumlin administration built its single payer in 2011, it didn’t start with access, it started with cost containment. The Shumlin plan had two main pillars—cost containment first, and once that was accomplished, a shift of health insurance premiums and other private financing (about half the total cost) to the Vermont tax base. In his early speeches on the subject, Shumlin said repeatedly: “If we can’t get costs under control, we’ll pick up our marbles and go home.”
   In December of 2014, Shumlin picked up his marbles and in 2016 he went home. Importantly, however, the marbles he picked up were the financing marbles—the Green Mountain Care Board kept right on rolling toward cost containment, and so did OneCare Vermont, the state’s ACO. Today, Vermont is closer to achieving sustainable health care costs than any other state in the country. Federal Medicare officials understand that and they are praying we succeed, because health care costs are killing the federal budgets (Medicare) and state budgets (Medicaid).
   That’s why Smith is wrong. He acknowledges that there has to be regulation of hospital budgets, the engine of health cost inflation. What he doesn’t get, or doesn’t want to get for political reasons, is that we still have to move from fee-for-service reimbursement to block financing to get costs under control. Failure to do that will cost Vermonters hundreds of millions of dollars in unwarranted health care payments, and it won’t take long to get there.
   I have suggested above that maybe Smith doesn’t want to see reality in this issue for political reasons. I don’t know Smith and I have no direct knowledge of his motivation, but consider:
   One of the most egregiously inflationary decades in Vermont’s hospital history ran from 2000 to 2009. During that period, nearly every hospital in the state doubled its spending, with no obvious demographic changes. Hospital costs went from $922 million to $1.7 billion, a dollar difference of $756 million, less than half of which was reasonably justified. People got older, of course, but at a tiny annual rate compared to the health care costs.
   The Governor for eight of those 10 years was Jim Douglas. His Secretary of Administration was Mike Smith; his Secretary of Civil and Military Affairs was Jason Gibbs, who is Chief of Staff to the current governor. That administration did nothing to rein in the health care cost engine. In fact, it was the decade of the “oughts” that finally convinced every serious policy person that something had to be done to solve the cost problem. The burden of the Smith column was to suggest that this history did not exist, and that the Green Mountain Care Board has become something of an expensive luxury.
   Maybe this is all coincidence, but in my view, the single most important factor in the political environment for health care reform is the fact that Phil Scott is massively conflicted over it. Other than blocking any new taxes, and the fantasy about turning Vermont into some amalgam of eastern Massachusetts and Boulder, Colorado, Scott doesn’t appear to have any substantive policy ideas of his own. But health care reform is plowing steadily ahead and Scott is clearly befuddled by it.
   On the one hand, he has told the federal Medicare officials that he was “all in” on reform. As far as his own public is concerned, Scott has basically told the people nothing. As his Secretary of the Agency of Human Services, Scott hired Al Gobeille, who, as Chair of the Green Mountain Care Board, did a brilliant job negotiating a ground-breaking agreement with the Feds that is taking Vermont to the forefront of 21st century American medicine. Gobeille may be doing a good job as Secretary, but he has basically vanished from the health care reform scene, despite the fact that he knows as much about it as any of the players at any level. I believe that Gobeille’s retreat from the legislative scene is being driven by Gibbs. The only Gobeille appearance in a long time was his recent testimony before Senate Health and Welfare in opposition to the Universal Primary Care bill, which would require a new tax…so, forget about it.
   At this point, I can sense some skepticism from my corps of adepts. Is there evidence that Scott wants to kill the Green Mountain Care Board? Fair enough. My belief is that Scott himself really doesn't want to do that--it would be too much of a political mess. But I think it's clear that Gibbs does--and that sentiment along represents a serious threat to the Board's ability to do the work it needs to do. The argument for that looks like the following:
    The course of reform depends on the outcome of a delicate minuet between the Green Mountain Care Board, and OneCare Vermont, to shift the financing and culture of the whole medical delivery system. A couple of weeks ago, Scott’s budget guys told Kevin Mullin and the Green Mountain Care Board that they would have to cut from their budget for the state’s fiscal year 2019, which starts July 1 of this year, by $250,000.
   That is a 9.4 percent reduction in one of the single most important pieces of state government. What is more striking is that this cut, which will force the Board to lay off three of its 28 employees, will actually save only $75,000, which comes to just four one thousands of one percent in the $1.8 billion General Fund. That number is so small it will get lost in the rounding of the state budget... A budget cut of just under 10 percent, and a 12 percent reduction in its staff to save four one thousands of one percent—is that really about repairing the General Fund, or is it a transparent political move by Scott to push health care reform even further under the Fifth Floor rug, and maybe provide some surcease from the Gibbs pressure as well. And with Mike Smith operating as a stalking horse for his old Douglas-days partner?
   Draw your own conclusions. Mine should be pretty clear by now. But the core question remains: Will the Green Mountain Care Board be able to continue as the effective leader of health care reform in the state?

   I'll come back to that issue on Tuesday.

What is an ACO, Anyway?

by Hamilton E. Davis

   One of the most severe challenges confronting health care reform in Vermont and the United States is the fact that reform proponents speak a different language from day-to-day English. The essence of reform is changing the way money flows into the system so as to change the economic incentives for doctors and hospitals. People who specialize in health care reform understand that and they have developed ways to talk about it to each other. The problem is they talk to the non-specialists the same way.
   To the press, legislators and the public, the language of the priesthood is incomprehensible. The insiders are industrial-strength professionals. Many have advanced degrees in the field. They spend every day at it, and most of them have for years. The rest of the folks, especially the legislators, are amateurs. Many are intelligent, but they are decidedly not trained; they have no professional staff; they have a governor who is hiding from the reform issues; and the legislators who are specifically assigned to deal with reform directly don’t understand the health policy creole any better than their colleagues.
   Some of that is inevitable: any complex, technical matter can be difficult to grasp easily, or quickly. It is also true, however, that the language of the health reform priesthood has evolved in such a way that it deflects inquiry and thereby masks complexity; and, more importantly, reduces the political pressure that inevitably attends major cultural and financial change.
   Following is the kind of thing you hear when the priesthood talks to the congregation. “We need to shift the financial incentives by moving to alternative payment models…we need to shift from fee-for-service reimbursement to value-based payment…we need to shift from paying to cure people after they are sick to keeping them from getting sick in the first place…we need to focus on wellness, not expensive therapies.”
   That effectively shuts down the instinctive resistance to change: who can object to getting value for what you pay? And who wouldn’t rather stay healthy on the cheap than undergo powerful medical therapies that cost a ton of money and involve getting stuck with needles and sliced up with scalpels and made to take horrible-tasting stuff that makes your hair fall out?
   At that point, the priest, or priestess, is off to the races, laying out the intricacies of ACOs, and attributed lives (which actually has nothing to do with “coverage”), and MIPS and MACRA, and multiple payers versus single payers, and one-sided risk compared to two-sided risk, and how CMS (or CMMI) looks at things rather than how DVHA wants its contracts compared to how Blue Cross looks at the whole hairball. All of which sails right over the heads of the congregation, and leads to the confusion and angst that have hung over the legislature for the last few weeks.
   I believe real understanding has to start with what an ACO is. ACOs are the mystery meat of reform. After seven years of work on this issue, you hear questions in the legislature like: “Why do we have to have an ACO? Will I be covered by the ACO? Should we write letters to patients to tell them they are in an ACO, or would it be better to put a sign to that effect on the doctor’s waiting room wall. Questions like these flummox the professionals because they have no relevance to the real issues.
   So, a suggestion on a new way of talking about an ACO:
   An ACO is just a business device that allows a group of hospitals and doctors to deliver a full range of acute medical services to a block of patients for a fixed price per person. That’s it—fixed price contracts, which is the only way to get health care costs under control.
   It’s not that complicated; it’s the kind of thing that ordinary people do every day. They buy stuff -- lawn mowers, cars, ice cream cones. The stuff has to be good enough, or they won’t accept it. The price has to be right, or they won’t pay it. If a person wants to build a garage, he or she finds a guy with a pickup truck, a chop saw, a nail gun and strong forearms. The buyer makes a deal with the pickup truck guy to build the garage for a specific (fixed) price that both can live with.
   There is an alternate way, however. You can hire the guy for “time and materials.” Whatever volume of supplies the guy buys, at whatever price is most convenient, you pay for. You’re paying the guy by the hour, so the longer it takes him, the more he gets paid. Congratulations. You have the most expensive garage in your neighborhood.
   We have been buying “time and materials” health care in the United States for 300 years, and since 1966, when Medicare and Medicaid put a blowtorch under the demand teakettle, it has been killing us. Before the federal and state governments began paying for medical care for the elderly and the poor the country spent 6.6 percent of its gross national product on health care. That number nationally is around 18 percent, and in Vermont, it’s 20. That is why Americans pay twice as much for health care as do the citizens of other fully developed countries—for worse results.
   Fixed price contracts are, by a very long reach, the best way to turn this malignant tide. Federal law established ACOs as the vehicle to make such contracts possible in a very complex industry. If there is a consensus understanding of what the Vermont ACO is, then the at least the profusion of issues that arise in the legislature’s deliberations can begin to focus on real questions:
   So, how has it worked so far? Are patients included in fixed price contracts getting the care they need? Is there any evidence that patients included in the 2017 fixed price contracts got deprived of necessary care? What is the effect of the new contracts on the cost of care in the state? What are the barriers to expanding the project to meet the federal requirements for Medicare participation…how should we deal with primary care as opposed to hospital-based care?
   There will be an avalanche of such questions, but if there is a common understanding of what the ACO is, at least the forum will consist of a conversation instead of cacophony. And perhaps, slowly, the professionals and the amateurs will learn to talk to one another.
   Trust me, that would be a very good thing.   

A Model for ACO Payments to Primary Care Docs

by Hamilton E. Davis

Note to my readers: the following text is a model showing how OneCare Vermont, the state’s Accountable Care Organization, will pay primary care doctors who participate in the expanded reform effort that debuted at the first of this year. The purpose of the model is to underpin two articles that are not yet written—one on testimony before the Green Mountain Care Board last week by a group of primary care doctors, the other on the issue of how the Green Mountain Care Board is managing the reform effort. I am putting up the model by itself because some of the questions it addresses are already under discussion by the House Health Care Committee. The two fully elaborated articles will be forthcoming.

The Assumptions

   The following is a model showing the potential payments to a primary physician who attributes his or her patients to the ACO, OneCare Vermont. The size of the panel is taken from the research done by Dr. Deb Richter in support of her proposal for universal primary care—1200 patients. The actual panel sizes could range from 600 to 700 on the low end to 2,000 on the high end. The revenue in the Richter plan to support that panel would be $500 per patient, or a total of $600,000 per practice per year. The Richter number does not include payments for mental health and substance abuse treatment. Nearly all the numbers in the model are available from public sources; I have indicated where I do not have a hard number.
   A second assumption is that the model practitioner would attribute half the panel—600 patients—to OneCare. That percentage could vary widely. Those patients would be arrayed across three payers—Medicare, Medicaid and commercial. The spread could be highly variable based on payer-mix in the provider’s service area; and it could vary also by specialty—one practice could have large numbers of Medicare patients, whereas a primary care pediatrician probably would have no Medicare patients. The benefit package was designed by OneCare as part of its budget submission to the Green Mountain Care Board; the Board approved the budget in December. The model numbers would apply to the 2018 calendar year (with one exception noted below).
   A third assumption is that a primary care doc working full time would take home $180,000 per year, That number is a rough median from Web data on primary care salaries in Vermont. The $180,000 number would probably be high for a rural doc with a lot of Medicaid patients; some hospital-based providers might be higher. The remaining $420,000 to a single-doc practice would pay for infrastructure—nurses, clerks, other expenses.

The Compensation Plan

   Step One: OneCare will pay an administrative fee of $3.25 per member per month to primary care doctors attributing patients to the ACO. In the model that is 600 patients. The $3.25 rolls up to $39 per patient per year; for our model practice the total per year would be $23,400. The purpose of that is to defray the cost of reporting necessary data to OneCare.
   Step Two: OneCare will pay primary care doctors a premium of $15 per member per month for each medically complex patient in those practices. That would roll up to $180 per patient per year. OneCare will determine the eligibility of a given patient using an algorithm designed by the Johns Hopkins academic medical center in Baltimore. There is no way to determine how many such patients a given doctor would have. But national data shows that the medically complex proportion of the Medicare and Medicaid patients of an average primary care practice runs to about 16 percent. For Blue Cross patients, the percentage would be just three percent.       
   The payer mix for a given practice can vary widely, of course, but the generally accepted numbers show that about half of acute care is paid for by federal and state governments (Medicare and Medicaid) while the other half is paid for mostly by commercial insurers.
   To get a model figure for the complexity payment, I’ve cut the 600 total attributed patients to 300 (using the 50 percent government parameter). Then, based the national averages, I’ve taken 16 percent of the 300, which is 48 patients. At $180 per patient, our model physician would get an additional $8,640. The private insurance cohort of 300, mostly Blue Cross, would yield just three percent, or nine patients, At $180 per year, Blue Cross patients would yield $1,620. The total complexity of care component would amount to $10,260.
   Step Three: OneCare will operate a Value Based Incentive Fund that will pay a premium based the on the quality of the care delivered by the primary care physician. There is no good way yet to estimate what this program might produce for a primary care doctor. OneCare will use the experience obtained in 2017, but that won’t be known until mid summer of 2018. Based on some conversations with people in the industry I have used a placeholder of $8,000. It is a very rough estimate, but considered conservative.
   Step Four: OneCare will also pay a premium of $10 per member per month, or $120 per year, for those primary care docs who are designated by their complex patients as the “Lead” physician in the management of their care across the continuum of that care. This number is likely to be small for a given doc; there is no way yet to estimate what the experience will be in the system. For a panel of 1200, with 600 of those attributed to the ACO, I’ve used a guess/place holder of 20, which would be an additional $2,400 per year to the physician.
   Step five: One of the most financially important components to membership in OneCare is the federal government program to pay primary care doctors in such organizations five percent more for the care they deliver to Medicare patients. The model uses the Richter proposal. If we cut the panel to 600 and then assume that 200 of those are Medicare and multiply by five percent of that we get $5,000. That benefit would not be available until 2020. A positive wrinkle for primary care docs in this category is that Medicare will pay the five percent bump for all the Medicare patients in OneCare participating practice, even those whose lives are not attributed. An example of such an increment would be Medicare patients enrolled in the Medicare Advantage program run by United Health Care; care for those patients is paid for by United, but Medicare would still pay the five percent bump. For the model, that would double the bump category to $10,000. I have limited this category to $5,000, however, because it won’t take effect in 2018; another reason is to render the whole exercise more conservative.

Total Financial Benefits to Primary Care

Administrative fees    $23,400
Complex care               $10,260
Medicare bump           $5,000 (not available until 2019)
Quality incentive        $8,000 est.
“Lead care”                      $2,400  (guess/placeholder)

Total                                   $49,060

Indirect Benefits

       In the planning phase of reform, primary care doctors in Vermont have made it clear that what they want most, in addition to fair financial reimbursement, is a reduction in the administrative burdens they must bear in the process of delivering care to their patients. That theme has led OneCare, the Green Mountain Care Board, federal Medicare officials, and Vermont’s Medicaid agency to develop a series of steps to ease the administrative burden:

  • In the first step of the execution phase of reform, which debuted last February, OneCare and the Department of Vermont Health Access (the state’s Medicaid Agency) negotiated a partial waiver of so-called Prior Authorization requirement in the reimbursement system. “Prior Auth” forces docs to get permission from somebody outside the delivery system to deliver care like X-rays and MRIs. There is a long way to go on Prior Auth—it is still required on drug prescriptions, for example--but the reform apparatus has made a start.
  • The Vermont health care reform team—The Green Mountain Care Board, the Governor and the Agency of Human Services-- persuaded federal Medicare officials to authorize the expenditure of $7.5 million for the continuation of the so-called Blueprint program in 2018. Blueprint money basically enables primary care doctors to address the social determinants of care. The extra bump was limited to Vermont because the feds are so hopeful that the state can lead the way to capitated financing for Medicare. Those officials believe that costs in the Medicare program cannot be controlled in the current fee-for-service reimbursement system. Federal Blueprint money has been eliminated in the rest of the country.
  • The U.S. Congress in 2015 passed the so-called MACRA legislation. This law was designed to provide both a carrot and a stick to encourage providers to participate in an alternative payment model like the one now being operated by OneCare Vermont. In essence, the new federal law says that if you join the OneCare, the operator of the alternative payment model, you will receive up to five percent more for the care you delivered to Medicare patients last year—with no quality reporting requirement…that’s the bump. The stick is that if you don’t join, you have to do considerable quality reporting to Medicare and if you don’t measure up your Medicare payments can be cut by up to nine percent. The carrot here is both the five percent increase in reimbursement, plus the elimination in the amount of federal paperwork you have to produce to show that your quality is high.
  • An important factor in the whole primary care political environment is that the benefits listed above are available not only to independent primary care doctors, but to primary care docs in Federally Qualified Health Centers (FQHCs). FQHCs already get federal subsidies aimed at ensuring the availability of primary care in underserved areas. The FQHCs that join OneCare will continue to receive those federal subsidies, as well as the financial support from OneCare.


   An obvious question is to determine how much of the increased revenue to each doctor is needed to support new demands on the practice, and how much would be an increase in income to the doctor. Participating in OneCare will generate some reporting requirements, but some of that work is already being done now. A rule of thumb in the industry is that one should divide the revenue increment in half, which would mean a $24,500 increase in business expense for each doctor and a $24,500 increase in the doctor’s take home pay. How the new payment system will operate in detail in Vermont won’t be known for some time. A preliminary assessment will probably be possible by mid-summer, when the figures from the first 11 months of 2017 are available. A major source of variability will be economies of scale: a five- doctor clinic would be able to structure support services more efficiently than that of a single doc. Moreover, to the extent that the new payment methodology leads to greater participation in the new new model the pay increase to the doctor would rise also.

Vermont Reform Sails Through Headwinds Into 2018

by Hamilton E. Davis

    Vermont’s health care reform initiative is entering its eighth year in a surreal policy and political atmosphere.
    Born in 2011 as then-Governor Pete Shumlin’s single payer plan, the reform project is on track to reach its most important target—cost containment in the doctor-hospital system in the state. The federal government has tasked Vermont with leading the U.S. to sustainable health care costs based on a shift from fee-for-service reimbursement to capitation.
   After five years of planning, the reform project entered the execution phase in 2017, starting with a contract between the state’s Medicaid agency and OneCare Vermont, the state’s Accountable Care Organization (ACO), to deliver care to some 30,000 Medicaid recipients in northwest Vermont, for a fixed price of $93 million; the ACO is now completing contracts with the federal Medicare Agency and Vermont Blue Cross to expand the total covered population to about 120,000 Vermonters.
   So, given this progress, which is unprecedented in the state’s 40-year cost containment odyssey, why should we consider the reform environment surreal?
   An important reason is a historical one. The original Shumlin plan called for getting costs under control first, and then shifting the private sector portion of the health care bill (about half the total) over to the state’s tax base. When Shumlin bailed on that portion of the plan late in 2014, the political momentum for reform faded away. 
  The reality, however, is that getting costs under control was always a prerequisite for the financing side, and that process is still underway. Indeed, there is nothing to prevent curling back to state financing assuming costs can be reliably reined in. That can’t be accomplished for at least another three to four years, if ever. But getting the costs under control would still amount to a stunning performance that would save Vermonters enormous amounts of money.  
   What’s going on now is that myriad issues that really make no underlying sense are coloring the environment for reform. The following is a sketch of those issues, many of which will play out in the current session of the Legislature.
    My tiny audience, with its exceptional motivational purity and its extraordinary depth of insight, will understand immediately that the sketch lacks anything close to sufficient evidence to compel agreement. Trust me that such evidence is extensive; I’ll expand on each element as the new legislative session progresses. Suspend judgment till that is forthcoming. For now: consider:

  • The most critical element in carrying out a major reform project is political support from the leader of the government—in this case, the governor. Since taking office last January, Phil Scott has uttered fewer than a dozen sentences about reform and the content of those sentences is strikingly misleading. In his state of the state address last week, for example, Scott referred to the project as an experiment that his government will continue to evaluate.
       The reality is that Scott has evaluated nothing in the reform arena, and is unlikely to do so in the future. In the first place, it is misleading to talk about the project as an experiment that could simply succeed or fail. The project is where the whole health care delivery system is headed. The only element that is directly up to Scott is the decision by his Medicaid Agency to enroll its recipients in a capitated contract with OneCare Vermont.
       Scott neglected to mention in his state of the state that his Department of Vermont Health Access (DVHA) had already signed such a contract with OneCare to extend the Medicaid portion of the project to most of the rest of the state.
       If you check the Green Mountain Care Board website you can see the actual contract. It shows that the $93,357,767.52 payment for 2017 has been increased by $138,965,645.44 to a total of $232,323,412.96 for 2018. (That spending is split between the federal and state governments.)
       And while Scott does not administer Medicare directly, his all-in support for reform is critical to the federal bureaucrats’ decision to break new ground with OneCare on financing of the politically critical health-care-for-the-elderly program.
       Those bureaucrats were in Montpelier to talk with the Vermont players last summer, and all the reports that drifted out of those closed sessions indicated that Scott had indeed signed on. If he hadn’t, the whole Vermont reform would be headed for a ditch.
        In any event, OneCare’s negotiations with the feds are just about complete and should join the Medicaid agreement on the Green Mountain Care Board very soon. Also very near to completion are the OneCare negotiations with Vermont Blue Cross to enroll a portion of Blue Crosses’ Exchange patients in a capitated arrangement. The total OneCare budget approved by the GMCB last month will run to $620 million or so which is one quarter of the roughly $2.5 billion tab for the state’s acute medical care. That’s one heck of a pilot.
       Scott clearly considers the reform project a live hand grenade, but he can’t hide much longer. Health care constitutes about 20 percent of the whole state economy and dwarfs every other single arena that the governor deals with. He’ll have to tell the Legislature, the public and the press where he stands or he’ll just look silly.
  • Speaking of the Legislature, its response to the reform project has ranged from perverse to just plain weird. In last year’s session, the major systemic issue was the Senate campaign to force private insurers to pay the University of Vermont academic medical center no more than they would pay to independent physicians.
       The reality is that such a step is impossible because UVM doctors get paid salaries, rather than fee-for-service, the prevailing method for paying independents. Time ran out on the so-called pay parity bill, but it has been passed by the Senate and still sits in the House Health Committee.
       The underlying driver of the Legislative environment has been an extended campaign by Senate President Pro Tem Tim Ashe, a Chittenden Democrat/Progressive and a few of his colleagues to denigrate the University of Vermont’s academic medical center; their argument is that the UVM system is too big and too domineering, and needs to be reined in.
       The difficulty with the Senate campaign is that none of its members understand how health financing works. The evidence for that is that the Green Mountain Care Board did precisely what they were told to in the pay parity bill—even though the bill hadn’t passed--and it changed precisely nothing. More on that soon…
  • With no political management of reform, the Legislature has begun to freelance, always a problem if the people trying to move the system have no real idea what they are doing. The pay parity bill in the last session was an example.
       The current session is likely to see more of it. One possibility is a suggestion by Sen. Chris Pearson, a Chittenden County Progressive/Democrat, that non-profit organizations that get state money be forbidden to pay executives more than Gov. Scott, about $145,000 a year. Such a step would be patently ridiculous: it would decimate health care in the state.
       A second initiative, one that is already gathering some steam, calls for the state to pay for all primary care. There will be lots of noise about that, but it isn’t likely to go far because it would require some sort of payroll tax. The most credible thing Scott ever says is that he won’t accept any new taxes. A more subtle, but actually more important caveat is that cost containment for Vermont rests on integrating its delivery system, and the primary care idea would carve primary care out of the system in operationally important ways. It is anti-integration, in other words.
       Still, the idea can be made to sound good and the concept of integrating the health care delivery system as the key to a cost-sustainable 21st century future is way off the Legislative radar; at least it is now.
  • One of the more bizarre currents in the reform political ether is the idea that maybe the Green Mountain Care Board should just be shut down, reconfigured, or emasculated somehow. That threat has been implicit in the contentious back-and- forth between the Board and the Ashe wing in the Senate. But it rose nearly to the surface in a column published recently by Mike Smith in VTDigger. Smith, a top staffer for former Governor Jim Douglas, took the occasion of the appointment of Tom Pelham to the Board to raise questions about the Board’s future, now that the financing aspect of reform is off the table.
       Smith didn’t actually say the Board needed to go, but he certainly implied it, and many of his readers took it that way. Smith has a right to his opinion, but the way he wrote it mischaracterized what the Board is actually doing. One of the Board’s key missions is regulation of hospital budgets, but an even more vital task assigned by the Legislature is to oversee the way that money flows through the system; that function is why the Board is a quasi-legislative body, rather than a quasi-judicial one like the Public Utility Commission.  
       The Smith idea is probably too far off the wall to get real traction, but it’s worth watching because Smith is expressing sentiments that are out there in the environment.
  • The Smith thrust illuminates another dimension of the reform environment that is surreal—the treatment of reform by the state’s press corps. Most of the press basically ignores it, probably because it’s very complicated and so becomes a minefield for overstretched reporters. The only organization to actually cover it over the last three to four years is VTDigger, and its performance has been, well, problematical.  I’ve written about that in the past, and I’ll revisit it soon.
  • The theme so far has been the surreal quality of the reform environment, but there is one overarching issue facing reform that is fully substantive and potentially a serious drag on the project. That element is the posture of the primary care doctors in the state. I say those doctors are more substantive because they are actually playing a key role in the outcome of reform, as opposed to some of the other players I’ve talked about so far. Phil Scott can hide from the reform issue; the Legislature can carp and maneuver around the edges; the press can wander in the health weeds—all without vitiating the complex dance underway between the Green Mountain Care Board and OneCare as they restructure the delivery system.
      The same is not true of the primary care docs. They are critical because of the provision in federal law that patients can’t be included in an ACO and thereby included in a capitated payment agreement unless they are “attributed” there by a primary care physician. There are about 700 primary care doctors in the state, and a significant number of them refuse to participate in OneCare Vermont.
       The effect of that posture is to block reform at hospitals in Rutland, Randolph, and Morrisville and to limit its scope in places like Bennington and Burlington. The 2017 and 2018 levels of participation in OneCare are fine; in fact, the feds would rather have the Vermont project ramp up slowly, rather than leaping ahead.
       It is also true, however, that the feds will require that the state have a very solid majority of the state’s population in capitated contracts by 2022. Reaching that target may not be possible without more primary care docs participating. That situation is fluid right now, and it’s not possible yet to assess it accurately.
       It’s difficult to come to a clear, overarching conclusion about the reform project at this point. It has no political leadership, but that has been true for the last two years and reform has continued to move forward. The Legislature is restive and massively ignorant about health care complexities, but it is not clear how that will play out; so far it hasn’t actually deflected the course of reform significantly. The press hasn’t been a substantive player to this point, and it probably won’t be unless either the Governor or the Legislature clearly sets out on a new course. That would require, I think, that the Legislature actually repeal Act 48, the foundational 2011 law setting forth the track for reform. I doubt that would happen, but who knows?  
       My intuition is that the current Legislative session will be critical. If the GMCB and OneCare emerge in June essentially unscathed by the forces of opposition then I think reform will have too much mass and momentum to be deflected. If not, well who knows?
       What I hope to give my readers is the best analysis I can for the issues I’ve listed above; and the closest watch possible of all the players over the next four months. Stay tuned.

Milestone: CHAC Abandons its ACO

by Hamilton E. Davis

   CHAC, an organization of federally-supported primary care doctors, announced yesterday that it would abandon its five-year effort to operate its own Accountable Care Organization (ACO) in a challenge to the primacy of the much larger ACO OneCare Vermont, which is spearheading the health care reform effort in Vermont.
   CHAC spent two years negotiating with OneCare about establishing a single, overarching ACO to manage the transition from fee-for-service financing for health care to block financing, or capitation, before walking away from the effort earlier this year.
  The decision Wednesday by the CHAC board does not commit any of its member primary care doctors to participating in any of OneCare’s capitation contracts, but it clears away the single most important barrier to that development. And the CHAC press release asserts the organization’s support for the so-called All Payer Model, the putative structure of the Vermont reform effort.
   The first step in the reform effort is now underway in the form of a contract between OneCare and the state’s Medicaid agency to deliver all the medical services necessary to 31,000 Medicaid recipients in the northwest quadrant of the state for a fixed price of $93 million.
   OneCare recently announced that the reform effort would expand to roughly 120,000 Vermonters as of Jan. 1, 2018. That would include people whose health care is paid for by Medicare and private insurance, as well as Medicaid. The areas of the state involved as of Jan. 1 would grow to include the southern tier of Windham and Bennington counties, as well as some sectors along the state’s border with New Hampshire.
   The coverage is patchy, however, owing to the CHAC effort to maintain its own ACO. As of Jan. 1 there will essentially be no reform in Rutland County, nor in the areas served by Gifford Hospital in Randolph, or Copley Hospital in Morrisville. Under federal law, residents cannot be attributed to an ACO unless referred there by a primary care doctor.
   Nonetheless, the CHAC decision marks a significant milestone in what has become a grinding campaign to recast the health care delivery system in the state. I will assess the new development in greater detail next week, but I am appending here the CHAC press release since I have seen no notice of it in the state’s press.   

For Immediate Release

Contact: Dan Bennett, CHAC Board Chair

(802) 728-2304

October 18, 2017 -- MONTPELIER, VT – On October 18, 2017, the Board of Community Health Accountable Care, LLC (CHAC) decided to terminate its Medicare Accountable Care Organization Shared Savings Program agreement with the Centers for Medicare and Medicaid Services, effective 1/1/2018 and to conclude ACO operations. Vermont’s health centers will continue to work together with the state and their community partners to improve the health of the patients that they serve. This will include continued focus on the clinical goals of Vermont’s All-Payer Model.

“CHAC has always believed that a strong primary care system working with other community organizations is the cornerstone to a healthier Vermont and more effective health care system. CHAC is proud of our record, particularly on behalf of the Medicaid patients we served,” notes Dan Bennett, CEO of Gifford Health Care and Chair of the CHAC Board. In August, the Green Mountain Care Board announced that for the third year in a row, CHAC reduced the total cost of care associated with its Medicaid patients, achieving savings for Vermont’s Medicaid Program. Between 2014 and 2016, CHAC’s average total cost of care (expressed as a “per member per month” average) declined by approximately 5%, from $189.83 PMPM (2014) to $180.53 PMPM (2016). At the same time that CHAC reduced the Medicaid dollars spent on care, CHAC implemented clinical quality improvement guidelines in the areas of Congestive Heart Failure, Diabetes, Chronic Obstructive Pulmonary Disease, Depression Screening and Treatment, Falls Risk Assessment, and Colorectal Cancer Screening, and CHAC demonstrated significant quality improvement on quality of care measures.

CHAC’s Board determined that they would make a greater impact for their patients and in support of Vermont’s All-Payer Model by focusing on local collaborations and continuing their joint work on quality improvement and health reform readiness. Vermont’s health centers and their community partners will continue to meet regularly to develop and implement evidence-based clinical recommendations, analyze data for purposes of health improvement and cost management, and learn from each other’s innovative work. “We have numerous opportunities every day to do good work on behalf of our patients in our respective communities and as a statewide network of health centers and primary care providers,” notes Pam Parsons, CEO of the Northern Tier Center for Health and Vice Chair of the CHAC Board. 

CHAC will be winding down its ACO contracts in the coming months and will ensure an orderly close-out for all 2017 ACO programs, including the Medicare Shared Savings Program.

# # #

When the Only Journalism is Biased Journalism

by Hamilton E. Davis

   In the lengthening chronicle of Vermont’s health care reform project, one of the least remarked yet most important factors has been the performance of the press. It is a sad commentary that press coverage is one of the most difficult barriers that reform has had to surmount.
   There are two basic thrusts to this indictment. The first is that press/media coverage has been not good, bad or mediocre, but, for the most part, simply missing. The underlying reason for that is the now years-long collapse of the newspaper business model; there simply aren’t reporters out there to get the job done. Even with that excuse, however, there has been real dereliction here.
   There are some very solid reporters in the state: Paul Heintz and John Walters at Seven Days; Neal Goswami at the Rutland Herald and Barre Times Argus; Pete Hirschfeld at Vermont Public Radio; until recently, Kyle Midura at WCAX; and until a year or so ago, Dave Gram at the Associated Press. These writers and organizations do an occasional story on health care reform, but not one of them really understands the issue, and they completely ignore major movements in the reform saga, whose importance in both financial and social terms dwarfs most of what they do write about.
   The only news organization that actually covers health care reform is VTDigger, the news web site founded in 2009 by Anne Galloway, a former reporter and editor for the Times Argus. That ought to ameliorate at least somewhat the lack of interest in the rest of the press corps, but it doesn’t. For the Digger coverage is badly skewed; it routinely reports material that supports a specific narrative, and ignores material that runs contrary to that narrative. Digger’s stories have regularly flouted journalism’s most basic rule—fairly reporting both or even multiple sides of a story. Unbalanced journalism like Digger’s is particularly damaging to public policy when there is no other coverage at all.
   What is the evidence for such an indictment?

Count One

   In my view, the evidence has been piling up for the last three years, but by happenstance an amazingly clear instance showed up just a few weeks ago, on Aug. 28. It’s worth starting this exercise by looking at the VTDigger story that ran that day under the headline “Regulators may tie pay parity to hospital budget process.” You can read it at this link, or Google it yourself.
   The story was written by Erin Mansfield, and I want to make it clear that my opinion about the quality of Digger’s journalism applies only to Mansfield’s reporting on health care, not to the journalistic work on other topics by either Mansfield or other Digger reporters. I also want to make it clear, however, that the responsibility for egregiously bad reporting lies not just with the reporter, but with the top editor, Anne Galloway. Galloway has backed Mansfield’s health care reporting every step of the way.
   The top of the pay parity story illuminates the way bad reporting can skew an issue to the point where it disconnects completely from reality. The story opens with a sketch of the narrative that Mansfield, along with several of the players in the health reform sandbox, have worked hard to establish over the last few years.
   The principal villain in this narrative is the University of Vermont’s health care network, which is based on the UVM Medical Center in Burlington, and includes its partner, Central Vermont Medical Center in Berlin, and Porter Medical Center in Middlebury, which is in the process of joining the UVM network. The network also includes three hospitals across Lake Champlain in New York. (The New York issue will be the second count in the indictment). Lesser villains include OneCare Vermont, the Accountable Care Organization established by the UVM network and Dartmouth-Hitchcock, the academic medical center just over the New Hampshire boarder; Blue Cross, which has been complicit in steering too much money to UVM; and the Green Mountain Care Board itself, which has been supine in the face of UVM and OneCare’s power and has dragged its feet on legislative demands to cut UVM down to size.
   The good guys in Digger’s narrative are HealthFirst, a small group of independent physicians, whose executive director Amy Cooper, has led the HealthFirst assault on UVM; Sen. Tim Ashe and some of his Senate colleagues, who have argued that the future of Vermont health care depends on independent physicians; BiState Primary Care; and its close partner, Community Health Accountable Care, which is comprised of most of the Federally Qualified Health Centers in the state—groups of primary care doctors that get financial government help to keep them in place, mostly in rural areas.
   Those are the players and that is essentially the narrative that Digger has sought to establish. Look at the article on pay parity, which means paying academic medical providers less and other providers more.
  The subject of the Board discussion was “how to reduce disparities, which independent doctors have been seeking to do for years,” Mansfield wrote. The majority of independent practices are in Chittenden County “where many are either closing or selling to the state’s largest hospital, the University of Vermont Medical Center.”
    And: “HealthFirst has said doctors are often paid 250 to 350 percent more when they work for academic medical centers. The organization says the disparity is pushing doctors to sell or close their practices.” These numbers are completely bogus, because Blue Cross doesn’t report fees for professional services and overhead or facilities separately.
   As for the Board, Mansfield writes: “The Legislature has been passing laws for about three years in hopes of narrowing the gap, but lawmakers complained in April that the board has not done enough to implement changes.” That’s the Digger narrative, and here’s where the specific count of journalistic malpractice occurs:
    The August 28 Board meeting was held for the purpose of laying out the Board’s research project on pay parity, which showed that the entire narrative was simply rubbish. The grounds for that was not simply an array of contrary opinions by this authority or that, but was rather the findings of an unprecedented survey of doctors in Vermont.
   The survey, which you can read at this link, was designed by Board member Jessica Holmes, an economist on the faculty of Middlebury College, and reported the views of 404 Vermont doctors. Those views were crystal clear. They don’t care very much at all about the disparity in payment rates.
   What they really hate are the administrative burdens of independent practice. They also dislike the Medicaid reimbursement rates; and they worry about how reform models might affect their practices. They also worry about the certainty of their incomes, not the size of them. And so far from being pushed to sell out to UVM or giving up practice altogether, the great majority plan to continue practicing just the way they do now.
   As the report said, after summarizing physicians’ dislikes about the medical practice landscape in Vermont: “Even with these frustrations, most clinicians plan to continue practicing in the coming years as they are today.”
   There is definitely a move to consolidate practices, and the claim by players like Ashe and HealthFirst is that the trend is driven by a combination of rapacious acquisitiveness on the part of UVM, along with the pay differential. However, what the survey showed is that the consolidation movement has little or nothing to do with differential reimbursements to UVM but is simply a local manifestation of the same trend that is going on all over the United States. I wrote a lengthy report on the survey on my blog, A Vermont Journal, under the heading “GMCB Survey Blows up Ashe Argument.”
   The survey was a striking departure from normal regulatory practice. It was designed, as I said, by Jessica Holmes, a Yale-trained economist; it was carried out very rapidly by the GMCB staff; and it had a very high response rate for such endeavors—400 of the roughly 2000 doctors in the state. It seemed to me to be close to peer-reviewed technical journal quality. And it absolutely zinged the whole Ashe, HealthFirst, et. al. campaign.
  Anyone who seriously cares about what happens to the Vermont health care system would benefit by looking at the whole thing. You can read the survey itself on the GMCB web site. You can also read my report on my web site at this link. See whether you think I got it.
  My point here, however, is about press performance. And the key takeaway there is simply this:
   The Digger story never mentioned the survey.
   There is no journalism theory on this planet to justify a performance like that. Mansfield often goes in and out of meetings, and an apologist for Digger might suggest that she simply missed it. The fact is, however, that following the staff description of the survey, the Board members spent a goodly length of time discussing how to react to it. And Mansfield’s story carefully picked its way through the discussion, working hard at reconciling their comments with her narrative, and ignoring the striking difficulty the Board members had in trying to figure out what to do in light of the survey findings.  
   The situation was laid out clearly by Holmes herself. The survey was meant to try to comply with the legislature’s insistence that the board deal with disparities in pay. Holmes said there was no question the claims about damage to the system from them was disproved by the survey itself. The problem, she said, is that while the sentiment of the Legislature is clear, trying to drive changes in the way insurance companies reimburse doctors and hospitals is very complex, and potentially very expensive.
   Moreover, the Board needs to keep in mind that the whole thrust of Vermont reform is to shift from fee-for-service reimbursement to block financing, or capitation. The first contracts in that effort have been in place since February, and the project is on track to expand in 2018, and the whole point of the Vermont reform is to render fees for specific services moot.
   It’s a house of cards, she said. It might be better not to monkey around with it.
   Con Hogan, who retired from the Board a week or so ago, said he agreed with Holmes on that point. He said he wouldn’t want do anything that would interfere with the movement of independent doctors into OneCare Vermont, the Accountable Care Organization that is the vehicle shifting from fee-for-service financing to capitation.
   Board member Robin Lunge also sounded amenable to such a strategy.
   But then the chair, Kevin Mullin, stepped in. “That’s just not going to cut it,” he said of the idea of bypassing the problem of trying to tell commercial insurance carriers how they should pay providers still operating under fee-for-service. That was the quote Mansfield needed to drive her narrative, which supports the Senate’s effort to support independent physicians.
   There is nothing basically wrong with that—Mullin’s view is critical and needed to be reported. The problem was that in the Digger story no one could know about the survey that so severely undermined the argument made by Ashe and the Senate. That’s biased journalism. It could go straight into a journalism textbook.   

Count Two

    In an issue that arose out of this summer’s hospital budget hearing, Digger jumped at the chance to take an easy shot at UVM for its management of the New York State segment of its network. UVM owns three hospitals in New York; the largest is in Plattsburgh; the others are in Malone and Elizabethtown. A fourth, a small hospital in Ticonderoga, will down-size to a clinic and be managed as part of the hospital in E-Town.
   Two of the hospitals have lost money in the last couple of years, and Digger began to pursue the question of whether UVM had bailed them out, and in the process sent Vermont money to New York. Is UVM using our money to subsidize New York, was the question. Digger ran three stories on the issue, with the theme that UVM is apparently using Vermont money to bail out the basket cases to the west. A subtheme was the proposition that UVM was hiding the facts from the public and the Green Mountain Care Board. They got a boost from Kevin Mullin, the chair of the Board, who bought right in to the narrative.
   The first story was straightforward enough, laying out the financial problems that had plagued the Plattsburgh and Malone facilities since before UVM got involved; and reporting Todd Keating, the network’s financial officer, comments on how UVM would help the New York units to improve, but would not “subsidize” them.
   A week later, however, Digger ran a second story to the effect that UVM was transferring money to New York hospitals. Keating was “backtracking on recent statements about whether the network’s flagship hospital transfers money to hospitals in New York,” the story said. UVM had sent $7.5 million to Plattsburgh to cover a budget shortfall.
   In the wake of all this back and forth, Marc Stanislas, member of the UVM network’s finance team, provided the Board with a detailed analysis of all the money transactions between the Vermont and New York elements of the UVM network. It was the only hard data that exists on this tempest in a teapot and it fully illuminates the issue.
   The spreadsheet showed that by any measure, it is New York that is supporting Vermont financially, rather than the other way around.
   By far the most important datum is the $180 million that New York patients send to the UVM network for treatment at the UVM Medical Center and associated network units. That money pays for a significant piece of the UVM network’s fixed costs; it also enables UVM to provide a wider array of specialty services than they might otherwise be able to afford.
   The Digger stories, however, focused more on the much smaller internal financial transfers. That analysis is instructive, too. The Stanislas analysis covers the actual spending for fiscal years 2015 and 2016, the projected spending for 2017 (the current year), and the budgeted spending for FY 2018, which starts Oct. 1. It looks like this:


   So, there you have it. Over the four year period of the inclusion of New York’s three hospitals in the UVM network, a flow of more than $100 million to UVM, a huge plus in itself. And then there is the $180 million that will flow into UVM coffers in the coming fiscal year.
   Pretty much disposes of the whole “Vermont is subsidizing failing New York hospitals” issue.
   You won’t read anything about that in Digger, however. Doesn’t fit the narrative.