Editor’s note: This op-ed is by Jeff Wennberg, the executive director of Vermonters for Health Care Freedom.

Commissioner of Financial Regulation Steve Kimbell argues in his commentaries that cost containment is a must for Vermont’s health care system, and on that point we all agree. The question is, will the reforms he and the Shumlin administration are pursuing succeed or will they make matters worse?

On June 14 the Green Mountain Care Board heard a presentation by Anna Gosline from the Blue Cross Blue Shield Foundation of Massachusetts. Anyone involved in Vermont’s race to implement its reforms is advised to pay close attention to the findings of the Massachusetts study, as it supports the position Vermonters for Health Care Freedom has held on the question of cost containment; which is that the approach being implemented in Vermont will not contain costs but will result in rationing of health care services.

Overall spending on health care is a function of volume, or the number of services provided times price, or the cost for the service. Cost containment programs can reduce the price charged for services or reduce the number of services delivered, or both. In Massachusetts the recent run-up of health care spending has been principally driven by increases in the cost of medical services and less so by increased demand, so the legislature directed the attorney general to investigate and report back.

That report was summarized in Ms. Gosline’s presentation. It found that prices paid by health insurers to hospitals and physician groups vary significantly within the same geographic area and among providers offering similar levels of service. Furthermore, these price variations are not caused by the quality of care or the sickness of the population served or complexity of the services provided or the extent to which a provider cares for a large portion of patients on Medicare or Medicaid, or whether a provider is an academic teaching or research facility. Moreover, price variations are not explained by differences in hospital costs of delivering similar services at similar facilities.

Perhaps most interesting from the standpoint of Vermont’s reform agenda, the report found no correlation between providers paid through global budgets, or risk-sharing contracts, and those paid through the traditional fee-for-service method. Indeed, the report states, “Contrary to what one might expect in a risk-sharing contract, some risk-sharing provider groups are among the highest cost providers in the state. The lack of correlation between payment methodology (e.g., fee-for-service versus risk-sharing payments) and [total medical expenses] has important implications for payment reform initiatives.”

So if fee-for-service payments or the other factors are not the cause of hospital price escalation, what is? The Massachusetts study found that the larger the hospital, the more they were able to charge. The report describes this as “market leverage,” essentially concluding that in the shark tank of medical service providers the big sharks get fed and the little sharks get the scraps.

This conclusion has profound implications for Vermont’s reform. In an effort to promote “efficiency” Vermont is moving to consolidate service providers into “Accountable Care Organizations” and move many services from smaller community-based facilities to our largest providers. But the Massachusetts study demonstrates that the effect of fewer, bigger institutions is neither better care nor lower cost. Indeed, it has the opposite effect, as the larger institutions exercise their “market leverage.”

The conclusion for Vermont is clear – global budgets do not constrain provider costs and the move toward bigger and more centralized delivery systems will accelerate price increases.The dual pressures of price increases and revenue or spending caps will force providers to restrict access to services, that is, ration health care for us all. Anyone who doubts this conclusion is encouraged to look at Canada, which has operated with global budgets for decades and is now moving back to fee-for-service to reduce patient waiting lists and restrain out-of-control cost increases.

Vermont has the opportunity to learn from the experience of others and get reform here right. Unfortunately, the Shumlin administration and legislative leaders are so wedded to creating a huge government monopoly that they have thus far been unwilling or unable to see the warning signs all around us.