Editor’s note: Hamilton Davis is VTDigger’s health care columnist.
The press conference Tuesday with Gov. Peter Shumlin and Green Mountain Care Board Chairman Al Gobeille amounted to a nervy gambit to nudge the federal government into giving Vermont at least somewhat more Medicare money to help finance health care reform in the state.
The administration and the board have been negotiating this issue for months without a resolution. The feds clearly like what Vermont is doing on reform, but one of their primary concerns is saving money on Medicare, and they are obviously wary about changing the way Medicare money flows into a state.
Currently, the feds pay roughly $1 billion for Medicare recipients in Vermont. The state is requesting a “floor” under the annual inflation rate increase that might provide some money over the amount spent for direct medical services.
A back-of-the-envelope estimate is that such a floor might provide Vermont with an additional $20 million to $30 million in 2017, the first year of a proposed five-year plan. The proposal calls for a minimum increase of 2 percent over the following four years.
The need for a significant bump in the first year would be justified by the fact that Vermont Medicare costs now are significantly below the national average, and the state would need the margin to get its reform plan off the ground. The 2 percent floor in the following years probably wouldn’t deliver much or any margin, but it would protect the state against major cuts in the national spending trend.
The Vermont side of the proposal would be a state promise to keep the overall five-year rate increase at least 0.2 percent below the national performance. The numbers are rough estimates only; much closer estimates should be available Thursday when a consultant reports on the issue to the Green Mountain Care Board.
The board could use the first year bump to bolster primary care in the state — a priority for everyone — as well as helping constrain the annual rise in private insurance premiums. The buzzword for the whole operation is “all-payer model.” The state already controls what it pays for Medicaid, and the GMCB has regulatory control over insurance premiums. So control over the flow of Medicare money would complete the control loop.
The whole effort, however, is fraught with difficulties. The Vermont proposal is just that — a proposal. Nobody has agreed to anything, so far. The scheme described by Shumlin and GMCB board chair Al Gobeille is also highly unusual: They are trying to bring a sort of public pressure into what has been a private negotiation.
They do have some strong arguments in their dealings with the feds. Vermont is now a low-cost state on a per capita basis for Medicare. The whole proposition from the national perspective is very cheap because Vermont is so small. And Vermont is farther down the road to a truly integrated system than anywhere else in the country, so that a pledge to lead the way to sustainable costs overall has substantial credibility.
And the feds didn’t object to Vermont announcing its proposal publicly. So far, they haven’t said yes, but they haven’t said no, either.
Still, it seems chancy. One factor in this regard might be that Medicare reimbursement rates are at root under control of Congress, not the executive branch. Congress could reduce the total money for Medicare overnight, which could complicate any agreement on a floor. The likeliest reason for federal caution, however, is simply that it would be a change in the way things work now, which is never easy.
The Shumlin-Gobeille press conference ran long, as the principals faced question after question, a process that also threw into high relief the extent to which the restructuring of the delivery system is encountering significant headwinds, now that the need to contain costs is moving from theory to execution.
Shumlin spun the issue of a revised payment mechanism as a new idea, but in fact moving away from fee-for-service has been the centerpiece of the cost containment aspect of health care reform since the whole project got underway in 2011. The problem is twofold: elements in the delivery that will be affected by real cost containment are pushing back strongly, a column for another day.
Beyond that lies the fact that there is no real understanding on the part of the public, and very little if any more understanding on the part of the Legislature, about how the cost containment machinery is supposed to work.
The governor laid out the core of the issue, which is that sustainable costs require a shift in reimbursement to doctors and hospitals from fee-for-service to block financing for per capita rates. There is nothing new about that — it has been the centerpiece of reform since the beginning and has been the subject for many articles on VTDigger and elsewhere. But when planners talk about the subject they do so in abstract terms.
You can’t get capitation, which no one is really familiar with, unless you have an integrated system, which sounds good but which no one really understands, and to get a integrated system you need to build an Affordable Care Organization, which people really don’t get, and worse, fear. Even the most involved legislators tend to think of an ACO as a malevolent black box that is going take away medical services.
A reasonably clear understanding of the issues involved, though, doesn’t mean that the execution phase of reform is easy. It is at least as difficult a socio-political issue that Vermont has ever dealt with.
From a purely political perspective, health care reform has been a target for Republicans, and their position is strengthened by the difficulties with the Obamacare Exchange.
They never pass up a chance to tie reform initiatives to that saga. In the wake of the press conference, for example, Lt. Gov. Phil Scott, a Republican and a candidate for governor in next fall’s election, issued a statement that “Vermonters are justifiably skeptical about state government’s ability to make and implement substantial policy decisions of this magnitude.
“The single payer discussion went on for far too long, Vermont’s health care exchange is still dysfunctional, and plans are still unaffordable for too many,” Scott said.
There is considerable political significance to this posture. In the 2014 election, which destroyed Shumlin’s political career, Republicans accused him of wanting to manage the costs of Medicare so that he could take medical services away from seniors. That is entirely false and is contrary to federal law. The rhetoric had an effect, however, as was suggested by Shumlin’s margin of victory — which was tiny.
The ACO system
Beyond that is the very complex problem of how you put together an integrated system that can solve the key problem of shifting reimbursements to doctors and hospitals from fee-for-service to block financing, known as capitation.
Shumlin dwelled on that at length in the press conference. Actually getting it done, however, is proving difficult.
An integrated system in health policy land today is called an Accountable Care Organization, a structure established in Obamacare, the federal reform system. There are three such entities now in Vermont. The largest by a wide margin is OneCare Vermont, which consists of the University of Vermont Medical Center, Dartmouth-Hitchcock Medical Center and community hospitals in Rutland, Bennington, St. Albans, Middlebury, Berlin, Newport, Brattleboro, and Morrisville.
The second is Community Health Accountable Care (CHAC), which consists of groups of stand-alone primary care doctors along with community hospitals in St. Johnsbury, Randolph, Townshend, Springfield. The third is Healthfirst, which is made up of independent groups of both primary and specialty physicians.
Knitting all this into a single structure has been in the works for a year without a resolution. A major reason for that is a provision in Obamacare that the only way a person can get into an ACO is by being referred to it by his or her primary care doctor. A person so referred is called an “attributed life.”
CHAC has no chance to operate an ACO that delivers capitated care to big blocks of patients, but they have very considerable potential for controlling lives because their members are mostly primary care doctors. CHAC signed a memorandum of understanding with OneCare and Healthfirst to the effect that there needs to be a single ACO in the state. How that would happen is not yet clear, but the gambit by the Green Mountain Care Board and the Shumlin administration rests in part on the assumption that there will be a single ACO soon.
The final layer of complexity lies in the fact that OneCare, the presumptive ACO, already has a Medicare waiver by virtue of being selected, along with a couple of dozen other ACOs in the U.S., to lead the way to the Next Generation of such bodies. If the Green Mountain Care Board gets the waiver it seeks, then Vermont could assess which waiver was most favorable and adopt that for the whole state. And if the feds offer a waiver on what the board considers unfavorable terms, the state can simply walk away.
The whole thing makes sense if you’re willing to crawl inside of it long enough, but it is hideously wonky, which aids opponents of reform. The reality is, however, that the execution phase of reform is now fully upon us, and policy makers and the interested public are going to have to confront what it will really take to control costs. This year, 2016, will tell us whether we’re up for it.
