The prelude to single payer

Janusz Porowski M.D. looks over a patients x-rays at Central Vermont Medical Center in Berlin. Photo by Josh Larkin.

In the Vermont health care debate, two words dominate: single payer.

For the hyphen-oriented, it’s one word: single-payer. Either way, those are the four syllables Gov. Peter Shumlin regularly intones as though they were his mantra while critics mutter them with a cynical sneer.

Maybe those are the wrong four syllables.

Even if it wants to, Vermont can’t create a single payer health care system without getting the federal government to grant the state waivers (at least two), and under federal law, those waivers can’t be granted until 2017.

The Vermont congressional delegation has proposed legislation moving that date up to 2014. But the legislation is going nowhere, rendering the “single payer” debate not exactly moot, but definitely provisional.

So maybe more attention should be focused on another four syllables: fee for service (or, for the hyphen-oriented, fee-for-service).

That’s not what the Shumlin administration and its legislative allies want to establish. It’s the traditional method of paying for health care — you go to the doctor for a checkup or treatment and the doctor sends you a bill — that Shumlin et.al. want to get rid of.

They at least want to transform the dominant payment mechanism into a relic or a make it a very small part of the health care financing system.

Phasing out or shrinking fee-for-service medicine would not be quite as revolutionary a change as switching to a single payer system. But it might be revolutionary enough to transform the way health care is delivered and paid for in Vermont and beyond. If it worked — if it started to bring down the cost of health care (meaning not the costs would actually go down, but would rise more slowly) — Vermont’s new mechanism would likely be copied by other states.

And while moving away from fee for service is less ambitious than creating a single payer system, it has this advantage: Vermont has the power do it.  No need to wait three or seven years for a federal deadline, or pass a bill with lots of ifs, buts, and trigger mechanisms in it, in which this provision goes into effect only when that federal law changes, or that provision only when this federal law changes. There would be one not very difficult federal hurdle to clear. But effectively, if the Legislature passes and Shumlin signs a bill calling for a phase-out of fee-for-service medicine in Vermont, it will be phased out, with the process starting later this year.

Nor is there any doubt that this is just what Shumlin, his advisers and the Democratic leaders of the Legislature are planning.

“Yes, it’s where we want to go and that’s part of the importance of the board,” said Steve Kimbell, commissioner of the Department of Banking, Insurance, Securities and Health Care Administration, referring to the five-person Health Reform Board that would be established under the proposed health care bill.

Even before the board is created, Kimbell said, state workers have been laying the “IT” (information technology) groundwork required before a fee-for-service method can be replaced by capitation (annual payments per person, whether or not the person needs health care that year) “bundling” (a flat rate for each episode of patient care rather than a separate charge for each service received) or some other system.

Vermont has already started moving away from fee for service, notably in the “Blueprint for Health” program established in 2003 to deal with the increasing costs of care for patients with chronic illnesses, especially diabetes. Craig Jones, Blueprint’s executive director, said that “a whole set of standards are already in place” to monitor an alternative health care financing system to ensure quality while reducing costs.

While it was too early to judge the results, he said, “the early trends (for cost control) are favorable.”

Because the payment system for Medicare recipients would change, the state would need one federal waiver, but according to Anya Rader Wallack, the Massachusetts-based consultant advising the Shumlin administration on health care, that waiver should not be hard to get.

“We’d have to convince (federal officials) that we’re going to do it in a budget-neutral manner and not harm beneficiaries and reduce quality,” she said. Switching away from fee-for-service payment was consistent with the new health care law, she said, and seemed to be just the kind of step preferred by Dr. Donald Berwick, the new administrator of the Centers for Medicare & Medicaid Services.

Despite all this groundwork, the enthusiasm of the administration, and the heavy Democratic majorities in both houses, there is no guarantee that fee-for-service’s days are numbered in Vermont. As Wallack noted, “my cost saving is somebody else’s revenue loss.” The likely losers are physicians, especially specialists, whose ample incomes largely come from practicing fee for service medicine.

But Paul Harrington, the executive vice president of the Vermont Medical Society, said his organization “does not now have a position about moving away from fee for service.”

Acknowledging that such a move would be a “major change,” Harrington said the Medical Society “is geared up to be at the table and somehow work out the details” of health care reform both before and after any legislation is passed.

He also said he was confident that fee for service payments would continue, in particular for specialists.

“The kind of health care they provide lends itself to that,” he said. “If you break a leg, it makes sense to pay for that treatment. Some kind of capitation system would be more appropriate for primary care physicians.”

Wallack said the administration does “want to work with providers to see what kind of model would work.” But the Shumlin team seems to envision a broader role for capitation, bundling, or some other contract method of paying for health care, including at least some specialist care.

Wallack acknowledged that a bundling or capitation system could give doctors and hospitals an incentive to under-treat patients. The current problem of physicians and hospitals sometimes ordering too many tests, each one of which brings in more revenue, could be flipped, with providers preferring not to perform a procedure.

This, she said, is where the increasingly sophisticated IT systems come into play.

“Quality measurement has gotten a lot more sophisticated,” she said. “It still has a ways to go, but we’ve got good outcome measures and preventive care measures.”