The Everest Conundrum: Will the Legislature Bring Bad Weather?

by Hamilton E. Davis 

Todd Moore, the outgoing president of OneCare Vermont, summed up the progress of Vermont’s health care reform project the other day by comparing it to climbing Mount Everest. The highest and one of the deadliest peaks in the world, Everest tops out at just over 29,000 feet above sea level. Only the most capable climbers make it to the summit, where there is barely enough oxygen to sustain life. Even the best of these athletes often die in the attempt.

Climbers first trek into base camp at 17,500 feet. On day one, they go to Camp One at 19,500 feet. Day two, Camp two at 21,000. Camp three at 23,500. Camp four at the South Col, 26,300. On Day five, the ones that make it that far try for the summit, and then go back down as far as they can. Days four and five are especially brutal: climbers face can face screaming winds, far-below-zero temperatures and the constant threat of blizzards, while their bodies deteriorate fast, posing the twin threats of pulmonary and cerebral edema.

In Moore’s view, the Vermont project is roughly at Camp Three, a strong performance over the last eight years, but with the toughest challenges still ahead. Some will say that metaphor overstates the case. Not in my view: Vermont has blazed a trail for the whole country in its campaign to get health care costs under control. The annual increases for our hospital system have come in at under general inflation since 2017, and infrastructure changes now coming on line hold out the clear potential to improve on that in the future. A comparison of the Green Mountain Care Board’s data for the hospital system shows that total spending in the 2013-2019 term represents a savings of hundreds of millions of dollars over the inflation trend of hospital spending from 2000 to 2009. That accomplishment, unprecedented in Vermont, was the product of the regulatory structure established by the Legislature in 2011, in which the Green Mountain Care Board oversees the operations of OneCare. For the benefit of doubters, I’ll lay out the actual figures in my next post and they can do the calculations themselves.

   Despite this striking performance, the reform effort has been dogged every step of the way by opposition from a wide range of stakeholders and other players. They include organizations like Vermonters for Health Care Freedom; important cogs in the process like the Health Care Advocate; and some key individuals like Dr. Deb Richter, a primary care doctor from Montpelier, who has been a long-time reform advocate, and Dr. Allan Ramsay, a former member of the Green Mountain Care Board. Richter and Ramsay are both reform advocates, but they strongly dislike the course reform is now on. It may also include Vermont Blue Cross, whose reform posture is considered ambiguous by some; the Blue Cross issue is a hairball on its own.

What is their case? They charge that OneCare is failing in its responsibility to function as the vehicle for doctors and hospitals in contracting with payers for care to groups of Vermonters. People are leaving OneCare, rather than joining it, they say. OneCare is not only failing in its obligations to provide care management and quality assurance across their network, they are deceiving their regulators, the Green Mountain Care Board, about those facts. (That is just a general summation. In a future post, I will report the anti-case in full detail.)

The first thrust by this informal coalition came last December when they tried to persuade the Board to reject the 2019 budget proposed by OneCare Vermont, the reform vehicle for the state. Since OneCare has contracts to begin paying for health care delivered to its insured members on Jan. 1 of this year, a denial by the Board could have derailed the reform effort. The Board turned the opponents’ attack aside, and approved the budget.

The relevance of this now is the possibility that the opponents will take the occasion of the 2019 legislation to try to kill off OneCare. If they fail, the reform structure probably will be mature enough by next year to be invulnerable to the kind of assault that OneCare survived in their budget hearing.

It is important to note at this point that no formal attack has yet appeared in the Legislature.  No anti-OneCare bill or package of bills has been introduced in the 2019 session. And it is entirely possible that none will. Which does not mean that the reform project can be considered safe to just keep grinding its way ahead. As of this writing we are just entering the third week of the session, and the health care committees have already spent an unusual amount of time on the reform issue. And there is no shortage in the Legislature itself of harsh critics of OneCare and its parent, the UVM health network.

Hence the relevance of Todd Moore’s comments about the classic Everest climb. When the climbers emerge from their tents in the morning at Camp Three, they are already heavily stressed. They are at 23,500 feet above sea level. No humans live permanently at that level. The climbers have 5,500 vertical feet of climbing left, over what will inevitably be the two most challenging days of their lives.

What will probably determine their success or failure, or even their life or death, Is the weather. A couple of bluebird days will mean that most of the people who can make it to Camp Three have the capacity to summit. But if the weather turns bad, and one of Everest’s blizzards scourge the track, all of our climbers will be in terrible danger. For the Vermont health care reform climbers, the Legislature is the weather.  

The equivalent to the two bluebirds on Everest would be to have the Legislature do—well, nothing. They don’t have to do anything; all the necessary statutory machinery for reform is in place. There is obvious angst in the Legislature, however, when it comes to health care reform. The source of the anti-OneCare sentiment is based in significant degree on unhappiness with the University of Vermont’s health network. In the last legislative session, for example, the Senate passed legislation aimed at forcing Vermont Blue Cross to pay UVM less for primary care, a move that failed. A particularly significant piece of legislation that runs counter to the integrated system contemplated by OneCare is the universal primary care bill, which calls for the state to pay the cost of primary care for all Vermonters. A bill to that effect failed in the last session but could come back again this year.

It is still not clear though what an effective anti-OneCare legislative initiative might look like. Even if the two bills cited above had passed, they would not have necessarily derailed reform. So, the outlook at Camp Three now is mixed sun and clouds. As the reformers move ahead, I offer the following as a description of the track ahead, and follow that with a sketch of the very tough obstacles that lie ahead, no matter what the weather…

At least part of the reason for the miasma of unease that overhangs the legislature is the difficulty of the policy problem itself, which is exacerbated by the way the policy wonks talk about it. Act 48, the reform law was passed by the Legislature in 2011, and since that time various reform bureaucrats have testified about the project before the money and policy committees of the House and Senate. What the legislators hear is stuff like: “OneCare is an ACO that is administering the All-Payer Model, which converts fee-for-service payments to value-based financing. The idea is to shift the health care system from just treating disease to healthier populations by keeping people out of the hospital before they get sick.” None of that is false, but nothing is clearer after eight years of exposition than that neither the Legislature, nor the press, nor the public understands it.

Consider: in just the third week of the ninth legislation session to grapple with this issue, the House Health Care Committee, and Senate Finance have invited Jessica Holmes, an economics professor at Middlebury College and a member of the Green Mountain Care Board to give the members two-hour seminars on the basics of health care financing in the U.S. Earlier this week, the Scott administration’s reform policy team and GMCB staff spent three hours in front of House Health Care talking about the way reform is supposed to work on the ground in Vermont. And that’s before there has been a single bill on reform introduced.

In the interest of helping in this regard, I offer the following primer:

Costs in the health care system are unsustainably high. The solution to a dynamic that is now consuming nearly 20 percent of the state’s economic output is to change the financing of health care from pay for each episode of care to paying doctors and hospitals a set price for caring for blocks of patients. The central idea is to approximate a private economy enterprise like Toyota, where every person in the company works every day toward the common goal of building a high-quality vehicle that will sell for a price people can pay. The whole American economy works like that, whether you’re buying a computer, a lawn mower, or a bag of carrots.

The key to the whole health care puzzle is that the way we buy medical services is upside-down different from how we buy everything else. In the U.S. system, we pay for each episode of care, so that the more providers do the more they get paid. If a provider gets it wrong the first time, the patient has to pay a second time to get it right. This dynamic generates one of the most common errors in public understanding: the cost of a given service is not simply the price per unit, but the volume of care delivered. Hence the need for a fixed price.

The first step in getting to a fixed price is to assemble the resources necessary to deliver a full range of needed care to a block of patients. You need primary care at the base; then specialty care, often in small community hospitals; and finally, the most sophisticated services at a tertiary hospital or academic medical center. The last is a bit tricky in Vermont.

The only tertiary care available to Vermonters is delivered by UVM’s Medical Center in Burlington and Dartmouth-Hitchcock Medical Center in Lebanon, just across the Connecticut River in New Hampshire. UVMMC is also, by far, the biggest community hospital in the state. The UVM system also includes Porter Hospital in Middlebury, and Central Vermont Medical Center in Berlin. The network is already an integrated system. The other 10 hospitals in the state, however, are independently owned and run. The only way to knit the state into an integrated delivery system is to create a vehicle called an Accountable Care Organization (ACO), a structure established in federal law known as Obamacare. Despite the fancy name, an ACO is very simple—it’s just a grouping of providers that serves as a loosely organized company that can deliver services at a fixed price. A working example is the 2017 contract between Vermont’s Medicaid agency and OneCare Vermont, the state’s ACO, to deliver care to 31,000 recipients in northwest Vermont for $93 million. About $60 million was funneled through OneCare to pay the four Vermont hospitals; the remainder was actually withheld by the Medicaid agency to pay on a fee-for-service basis for care delivered outside the network.

Under the terms of the contract, each of four hospitals—UVM’s Medical Center in Burlington, Porter Medical Center in Middlebury, Central Vermont Medical Center in Berlin and Northwestern Medical Center in St. Albans got a check at the beginning of each month to cover treatment for any of those 31,000. If a hospital spent more than the budgeted amount, they would have to eat it. If they spent less, they could keep it. For the first time ever in Vermont, doctors and hospitals were financially responsible for the system they run, not the patients.  Not all of the $93 million was spent on the fixed price care. Part of the money was retained by OneCare to pay fee-for-service costs at hospitals outside the home area, either out of state or in other parts of Vermont.

To sum up: Vermont now has as a fully functional ACO, OneCare Vermont. OneCare is owned by UVM health network and Dartmouth-Hitchock, the only nearby providers of tertiary care. The organization also includes as members all but two of the state’s small hospitals, Grace Cottage in Townshend and Copley in Morrisville. The number of primary care providers has grown steadily, although possibly not fast enough.

The above shows that the Vermont reform project is about half way to the goal it has to reach by the end of 2022. In Todd Moore’s metaphor: at Camp Three with two very hard days of climbing ahead. Following is a sketch of what lies ahead:

Follow the Money: The reform project is now in year three of a six-year implementation phase. To date the effort has saved Vermonters hundreds of millions of dollars. I don’t believe the public or members of the Legislature have a clue about that. The conclusion lies in publicly available data that a mildly promising seventh grader can follow

  • The Opposition Case: The opponents of the Vermont project have advanced a multi-pronged attack on OneCare Vermont, the vehicle for reform. Some of the claims, including some of the most important, are simply false, which is pretty easy to demonstrate. Some of the arguments, however, are perfectly valid. The issue in those cases is whether it reasonable to expect that OneCare should be abandoned because it has not completed six years of work in two years. Recall Todd Moore’s assessment that Vermont is at Camp Three on Everest, with the two toughest legs still to go.

  • The Scale Issue: Under its contract with the federal government, Vermont is committed to converting 70 percent of its residents to fixed price arrangements by 2022. The total under that umbrella comes to about 44 percent as of the first of this year. While that figure puts the lie to opponents’ claims that OneCare is fading away, it is nonetheless below a trajectory that would reach the target by 2022. The Legislature needs to understand this issue, and to consider how to think about it.

  • Care Management and Quality: Health care reform in this country has focused so far on getting costs under control. Fixed price contracts, however, raise the question whether the delivery system will cut necessary care in order to save money. Moreover, the health care reform statutes require the Green Mountain Care Board and OneCare to ensure that Vermonters get the highest possible quality care across the full range of services. These are complex and vitally important considerations, and they need to be vetted fully by legislators.

  • A major practical question during the transition of the acute care delivery system to a different infrastructure is the role to be played by Vermont Blue Cross. The Blues, in one way or another, impact the health care insurance of more than 200,000 Vermonters, and their level of participation has been very limited. That fact, and the tense relationship with the UVM system, need to be considered by the Legislature, as well as the whole regulatory apparatus.

  • The slide of Springfield Hospital toward insolvency has raised the issue of how to rationalize the small hospital system in Vermont.  A couple of years ago, Porter Medical Center got in financial straits and had to seek shelter under the wing of the UVM network. In a recent report to the Governor, the Green Mountain Care Board assessed the financial health of eight other small hospitals that could face challenging finances.  A huge question in that policy sector is how Dartmouth-Hitchcock Medical Center in nearby New Hampshire will relate to the community hospitals that lie along the Connecticut River, from Newport to Brattleboro. Eastern Vermont supplies some 40 percent of D-H’s traffic.

  • Finally, overarching all of the issues generated by reform is the general hostility toward the UVM health care system, which clearly dominates the health care environment. An important factor in that dynamic is the network’s president, Doctor John Brumsted, and his $2 million salary. Brumsted has become the focal point for the tensions generated by the challenges of reform; but he has been an indispensable player in Vermont’s leadership role in reform nationally. How these tensions get resolved over the next few years will determine the shape of the Vermont system out into the future.

The above challenges are critical and tough—no one in the United States has solved them yet. But they are all do-able. They resemble climbs that only the best performers can carry off, but the Vermont players who have gotten us this far seem fully capable of getting it done. There are some 850 ACOs in the U.S, and just 20 were chosen by federal Medicare officials to go for a fully integrated state system operating under fixed price contracts, the summit for health care reform.

If the Vermonters were actually on Everest, what they would see as they left Camp Three would be just a handful of climbers, far behind them. Ahead there would no climbers at all.
The big question would be the weather. That depends now on the Legislature.