This is the first of a three-part series on health care reform in Vermont. This first installment addresses current problems in Vermont’s health care system, the second focuses on what is needed instead, and the third centers on approaches to alternatives. The three authors are Julie Wasserman, Patrick Flood and Mark Hage.
This commentary is by Julie Wasserman of Burlington, an independent health policy consultant who worked for Vermont state government for over 25 years.
Hospital prices and health insurance costs are exploding, leaving affordability in their wake. This explosion of rates can be seen in the recently approved 11% to 19% rate increases for BlueCross BlueShield of Vermont and for MVP Health Care.
Additionally, Vermont hospitals just received a 12% rate increase (on average), the highest being UVM Medical Center’s at nearly 15%.
These hospital rate increases will be passed on to the commercial insurers who will be forced to raise insurance premiums and out-of-pocket costs to cover the higher cost of hospital care.
Hospital rate increases affect the commercial market, not Medicare rates, and, according to RAND data for 2018-20, UVM Medical Center’s commercial rates (prices) are already more than three times higher than Medicare rates. Vermont’s escalating hospital and health insurance rate increases are an indicator that we have made no progress.
Most experts agree that the price of health care services is the chief contributor to the increasing cost of health care. An Agency of Human Services consultant, Michael Bailit, who is currently leading Vermont stakeholders* in determining the future of Vermont’s health care reform efforts, states in his recent Health Affairs article that “price appears to be the primary cost driver in the commercial market.”
The Green Mountain Care Board concurs that the primary driver of increased medical costs is the unit cost (price), not utilization. It has become obvious that utilization is not the problem, given the long wait times to obtain care, workforce shortages that reduce access, and people’s hesitancy to seek care because of cost.
Juxtapose these rate increases and the resulting higher prices with the fact that a significant portion of hospital care is avoidable and need not be delivered. According to Mathematica, avoidable hospital care is hospital care that is unplanned and can be prevented through improved care, better care coordination, and effective community-based services.
Mathematica’s presentation to the Green Mountain Care Board notes that a striking 22% to 37% of inpatient and emergency room revenue at Vermont hospitals is potentially avoidable.
John Brumsted, CEO of the UVM Health Network, candidly admits the tertiary hospital’s “case-mix index is low” (severity of illness is low; patients are less sick), and UVM provides “more services to patients with lower acuity” than its peers. Examples of low-acuity avoidable care include hospital care for diabetes and hypertension that could be provided in the community, and non-emergent care provided in the emergency room.
VTDigger columnist Bill Schubart describes emergency rooms (and prisons) as the “end game of bad policy.” Emergency rooms are an expensive service designed to deliver high-tech resources to critically ill or injured patients. Yet, for people without access to primary care or mental health services, the emergency room becomes their default option.
It is well understood that a substantial portion of emergency room care could be performed in much lower-cost community settings or avoided all together. Even Vermont emergency room physicians have been heard saying that if half of all the ER non-emergent patients were triaged to more appropriate settings, the potential for savings would outpace those of current reform efforts.
Most Vermonters would be surprised to learn that nearly two-thirds of UVM Medical Center’s patient volume occurs in the emergency room (Berkeley Research Group presentation to the Green Mountain Care Board). UVM Medical Center accounts for roughly half of the state’s hospital expenditures, so emergency room volume of this magnitude represents costly spending and offers an opportunity for significant savings if avoidable care were provided in lower-cost community settings. (Note: This data is for UVM’s hospital service area, which means it does not include patients from upstate New York or elsewhere in Vermont.)
Hospital “length of stay” provides yet another measure of potentially avoidable care. The Berkeley Research Group also found that Vermont hospitals have a longer length of stay relative to benchmarks, especially UVM Medical Center, which had a markedly high length of stay. Hospital length of stay could be shortened if primary care, community mental health, and home health services were well-funded, since these services foster early discharge and have the added benefit of delaying and even preventing hospitalizations.
Vermonters are paying for this potentially avoidable hospital and emergency room care that they can ill afford. The state’s most recent Household Health Insurance Survey found that a whopping 44% of privately insured Vermonters have policies that do not sufficiently cover the cost of care (these are the “under-insured”).
Affordability is one of the most salient issues in health care today and its importance is explicitly underscored in Vermont statute. Yet, Vermonters’ concerns have gone unheeded, as evidenced by public comments on the recent rate hikes:
- “I have put off having serious health concerns addressed because we simply cannot afford the bill despite having insurance.”
- “The rate increases requested by Vermont hospitals are staggering and unsustainable.”
- “I am both a consumer and a provider. As a consumer, I have a hard time understanding what justifies such a significant price hike. With all of the federal funding that supported health care during the pandemic, that cannot be an excuse or reason for these increases.
As a provider, I see many patients that have high deductibles, so they pay exorbitant monthly payments, and then still have to pay out of pocket for most services. When a hospital like UVMMC wants such substantial increases, someone is not managing their financial resources efficiently.” - “All businesses are struggling to adjust to today’s market and Vermont families/businesses simply cannot afford these increases.”
The state’s all-payer model has utilized Vermont’s sole accountable care organization, OneCare Vermont, as the vehicle to spearhead current health care reform efforts. However, the organization has failed to reduce health care costs, slow the rate of growth, improve quality, shift to a better payment system, or address the critical lack of access to care.
Vermonters pay for these failed efforts because the accountable care organization’s administrative costs, which total over $80 million to date, are folded into the cost of care. Yet, OneCare serves a mere 37% of Vermonters and its Medicare participation (essential to the success of the all-payer model) will likely decline in 2022 due to the siphoning off of Medicare enrollees into private Medicare Advantage Plans.
The all-payer model’s concentrated focus on the accountable care organization has sidelined issues of affordability, price, avoidable hospital care, emergency room overutilization, and the importance of enhanced community-based services.
If we turn our attention to these key issues and directly address them (see next installments by Patrick Flood and Mark Hage, scheduled for Nov. 11 and Nov. 18), Vermonters might actually benefit from the state’s efforts.
* The Agency of Human Services barred (until recently) Vermont Legal Aid’s health care advocate (who has legal party status in health care matters) from joining the group of stakeholders convened to determine the future of Vermont’s health care reform efforts. Consumer representation has also been excluded.
