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.