by Hamilton E. Davis

Mike Smith, the new Secretary of the Vermont Agency of Human Services, weighed in last week for the first time on the issue of health care reform in the state, and signed right on to the whole bogus narrative that the University of Vermont is an evil empire and that OneCare Vermont, the state’s ACO, is a rogue that needs to be reined in and made “more accountable to the people of Vermont.” Ok, in his testimony to the legislative committee, he didn’t actually say that UVM is an evil Empire, but UVM is the founder and co-owner of OneCare and any of the reform players who live outside of a cave understands that the real target of the attacks on OneCare is the UVM health network.

The Smith performance was particularly dispiriting because the new Secretary, who took the job in November, had sounded a new note in the somnolent Scott administration: faced, for example, with the findings of the Seven Days investigation into the disgraceful Department of Corrections operation of the women’s prison in Chittenden County, Smith reacted instantly—the situation is unacceptable, he said, and he would fix it. Which he promptly began to do.

It was also striking how quickly he called out the management of the Brattleboro Retreat for its manipulative ploy of threatening to close if it didn’t get another bundle of cash from the state.

I thought, maybe there’s a new sheriff in town, a welcome development in the health reform saga after five years of political leadership that varied between ignorance, stupidity and outright prevarication, the whole toxic stew amplified by biased press coverage.

So, it came as a shock to me, and to many of the health care players, that Smith took the position that OneCare needs to be forced to be more accountable to the people of Vermont for its activities; that he, Smith, is insisting that OneCare shift to non-profit status; that OneCare must meet that “condition” in order to qualify for a $5.7 million contribution from state government. If OneCare can’t legally become a non-profit, then the condition is that it act like one, which means disclosing the salaries of its senior executives.

What was Wrong with Smith’s Testimony?

Let’s count the ways:

The whole subject of non-profit status has no substantive importance. It has political importance, but that arises from a palpably false narrative. OneCare was incorporated in 2012 and has submitted tax returns to the IRS for the years 2013-2018. In none of those years did it earn any profit or suffer any loss. Pretty unusual, eh? A for-profit company operates for seven years and never makes or loses as much as a dime. Not for OneCare it isn’t. OneCare’s business has nothing to do with either profit or loss. And,
Even if it did earn a profit, the law requires that a for-profit, wholly-owned subsidiary of non-profit owners must return that profit to its non-profit owners. Which means that the money can only be spent for non-profit purposes. In sum, for-profit status means nothing. The bogus narrative wants you to think that OneCare wants to make profit so that it can have a party.
The reason why UVM and Dartmouth incorporated OneCare as a for-profit entity was the Vermont law that stipulates that no more than half the members of the Board of a non-profit can be potential beneficiaries of the business. In the case of OneCare, the Board includes representatives of the participating hospitals. Keep in mind that all the hospitals in the state are non-profit. But those hospitals can be beneficiaries of the OneCare operation, which doesn’t mean that they can have a party either, since they are all non-profit. And the inclusive Board structure is necessary to spread power and influence across all the hospitals, not just the big ones.
The whole “accountability” thing is as much of a red herring as the “for profit” ploy. The Vermont hospitals, which constitute OneCare, operate under the most draconian regulation in the United States: the Green Mountain Care Board controls capital investment in the system, as well as every operational dime they spend, not to mention controlling the size of the bills they send to private insurers like Blue Cross and MVP. The Board also crawls over every nook and cranny of the OneCare budget; approval of the 2020 OneCare spending was accompanied by 25 conditions.
The result is that since 2013, the system, which includes the Board and OneCare, has saved Vermonters $2 billion. And while the Board supplies the regulatory muscle, it’s the hospitals that do the heavy lifting since they are the only ones that have a clue how to deliver health care. So, to whom does the Sheriff want OneCare to be more accountable—the Press, the Legislature, the public? Not one of those entities has the faintest idea how to improve the delivery of health care. Neither, apparently, does the Sheriff.
So, what about the $5.7 million that OneCare has requested from the state, and which Smith has said has to be conditioned on OneCare shifting to non-profit status. The first thing to note about it is that it’s budget dust—four tenths of one percent of the overall budget. A second thing to note is that the money doesn’t stay in OneCare; it gets transferred to either member hospitals, or to local communities who have asked for help in improving the health of their residents.

A quick overview might help here:

Total OneCare budget: $1,424,600,000 (1.42 billion)

Pass through to pay for hospital care $1,381,600,000 ($1.38 billion) 97% of total

Pass through to hospitals and communities

to aid reform $43,116,066 ($43 million) 3% of total

So, what is important here? By far the most critical piece of the $43 million pass through bucket is the $22.7 million OneCare passes through to support primary care physicians—directly. That is composed of direct contributions to primary care doc salaries, as well as roughly equal payments to help with administrative work required when the doctor “attributes” patients to OneCare. The piece connects directly to the heart of health care cost containment because the payers can sign fixed price contracts with providers for care to those patients.

Those fixed price contracts put an effective cap on the amount paid to providers, so that hospitals cannot rev up their revenue by doing more care, than medically necessary.

The remaining $20 million is passed on to both hospitals and doctors for programs like Blueprint, SASH, support for mental health treatment and the like; and support to local communities for population health. If a town wants money so it can buy snowshoes for its library that can loaned to local residents, OneCare can make such a grant.

That is what OneCare does. It does not make or lose money. It doesn’t have to be bailed out. It hasn’t done anything wrong. There is nothing in the record to support the claim that OneCare is some kind of rogue that needs to be reined in.

What is Really Going on Here?

So, is Mike Smith really as much of an ignorant yahoo as he sounded in his first legislative outing on reform? I want to emphasize that what follows here is simply my view, which flows from 40 years of wandering around the health reform swamp. I specifically want to note that Smith has not told me what his views or his intentions are in that regard. Given this Caveat lector to my tiny corps of brilliant readers, here we go:

Smith is a very different kind of player in an administration that barely has a pulse on most issues, and basically no pulse at all on the health care reform. I strongly suspect that he apprehends the reality that the UVM health network is actually a critical prop for the Vermont economy directly and that the availability of a national class academic medical center in Burlington is one of the state’s most critical social and political assets. On the issue of attracting new people, the UVM system’s importance dwarfs that of the Scott administration program to offer $10,000 to people from downcountry move to rural areas here. What happens when they find out that the only way to communicate is by carrier pigeon, and the idea of kids isn’t that great because our rural schools are getting hollowed out?

At the same time, however, I believe Smith understands perfectly that the pervasive denigration campaign of the last five years has made UVM a pariah, and its OneCare progeny a whipping boy; and that the shrewd way to manage all that is to accept on the surface the proposition that OneCare has to clean up its act, and that he is the guy who can manage that and protect the public in the process. I suppose that could work, but I have two huge problems with it.

The first is that the public, and much of the Legislature, has been told so many lies about what is really going on that it might be impossible for reform to get the kind of public buy-in that a financial and cultural upheaval of this magnitude will need. For Smith to jump on board that bandwagon looks to me like a terrible error. The State of Vermont faces massive problems that threaten its future—its schools are being hollowed out; its agricultural economy needs to shift away from dairy; Lake Champlain is under siege; rural Vermont is dying…the most important bulwark against these legions is health care reform. The first phase of health care reform saved Vermonters $2 billion in five years and that is just the first phase. Getting the final steps in place could save enough money to salvage a state economy that is going nowhere fast.

The second problem with the putative Smith foray is that OneCare doesn’t need the money. As I showed earlier in this piece, the total non-direct care that flows through OneCare runs to some $43 million. By an order of magnitude, the most important piece of that is the $22 million that goes to support primary care doctors in the state. Everyone moans about the problems of providing primary care to the state—the whipping boy OneCare is the only player actually doing anything about it. And the actual source of the money isn’t the state of Vermont, it’s the hospitals, and by a huge margin, the biggest share of that money is contributed by the Evil Empire itself, the UVM system.

As I showed above, the remaining $21 million pays for a range of programs that aid community hospitals to cope with structural change and to local communities to improve the health of their people. I say that OneCare doesn’t need another five or six million dollars because the reform project is on the cusp of a shift to Phase Two, which can save more than Phase One, but which will be much more difficult to execute. The five million more dollars might be needed more then.

My brilliant readers will note immediately that I haven’t said what Phase Two is. I know, I know. Not quite ready for prime time, but close. The Sheriff will need to bring his game way up for that, in ways I suspect he doesn’t even realize yet. I think he will. For in a toxic environment where uncertainty is the coin of the realm, one of the few things I am sure of is this:

Smith came to play.