Vermont Takes Next Step in Global Budgeting: Releases All-Payer Model

We recently published a brief on efforts underway in Maryland, Massachusetts, and Vermont to develop and implement global budgeting. Last week, Vermont took the next step, releasing an overview of its proposal to the Centers for Medicare & Medicaid Services (CMS) for an all-payer model. Vermont’s approach distinguishes itself by setting spending targets for almost all services – not just hospital care.

In 2015, the Vermont Legislature passed Act 54, which directed the Green Mountain Care Board and the Secretary of Administration to jointly explore the potential for implementing an all-payer model through a waiver from CMS. Over the past year, policymakers have been carrying out just such an exploration. Now Vermont has laid out the critical components of the state’s conception of an all-payer model developed as a result of that work, and reflects the current state of negotiations with CMS regarding the Medicare and Medicaid waivers that would be required to implement the plan. As explained by Governor Shumlin during a press conference on January 25, the framework remains a work in progress, and may be subject to modifications by CMS or the state. Still, it offers greater insight into the policy direction Vermont has embraced to move its vision of an all-payer system forward.

One of the most interesting aspects of the terms of the proposal is the specific information offered about the statewide spending targets, or the spending ceiling, envisioned under the system. Health care in Vermont consumes a substantial portion of residents’ incomes – estimated at 38 percent in 2015 and projected to rise to more than 50 percent in 2025, all else being equal.[1] Designed to make care more affordable for Vermonters, policymakers envision a spending target trend for all regulated revenue of 3.5 percent and a ceiling or total cap of 4.3 percent. At the same time, the state would commit to a rate of Medicare spending growth for the five-year life of the waiver (2017-2021) that is 0.2 percentage points below that of the national average. The cumulative yearly growth in per capita spending for all covered service revenue would be limited to the growth cap. Compliance with the spending caps would be enforced by the Green Mountain Care Board under its broad regulatory authorities.

Spending subject to the financial targets includes primary care and specialty physician services, other professionals, lab/radiology, mental health/substance abuse services (except for those delivered through state-designated agencies), inpatient and outpatient services, durable medical equipment (DME), and home health. Revenues associated with these covered services represent about 34 percent of Medicaid spending and more than 70 percent of commercial spending. Medicare regulated services include Parts A and B covered services and represents almost 88percent of Medicare spend in Vermont.

This proposal was developed using historical spend data as context. From 2008 to 2012, Vermont’s per capita rate of spend – for all payers, for the regulated services identified above – averaged 3.78 percent. Between 2005 and 2014, the state’s GSP was only 2.8 percent.[2] Clearly, health care trend has outpaced economic growth.

Vermont has opted for an approach more global in nature than that in used in Maryland. While Maryland’s all-payer system applies to both inpatient and outpatient care, Vermont’s system calls for the inclusion of a very broad swath of providers and services. Both states are tying their spending targets to trend in gross state product, hoping to bring the rate of growth in health care spending more in line with state economic growth.

Vermont’s proposed Medicare spending targets are more “generous” in their approach meaning that if Medicare grows more quickly than Vermont’s GSP, the spending target is 0.2 percentage points below that faster growth. By setting the spending target at 0.2 percentage points below the national average for the term of the waiver, policymakers are building in an opportunity to increase Medicare revenues in the state, allowing for additional investments needed to improve care.

The state also lays out other components of the all-payer model including strategies to improve population health, continued fostering of an integrated health system and investments in the state’s health care infrastructure. All components complement reform efforts that have been underway in Vermont for the past several years, and are all focused on attaining the Triple Aim. Over the coming months, the state will consider input from stakeholders regarding the model and proposal and will continue negotiations with CMS for necessary waivers. If all parties are able to come to agreement, waivers will go into effect in January 2017.

NASHP will continue to follow this progress and keep you updated.

 

[1] Green Mountain Care Board. All Payer Model Work Presentation. January 14, 2016. Accessed January 29, 2016 at http://www.gmcboard.vermont.gov/sites/gmcboard/files/Meetings/gmcb_1_14_16_apm_ppt.pdf

[2] Slusky R, Backus E, Costa M. Payment and Delivery System Reform in Vermont. Presentation to Green Mountain Care Board, July 23, 2015. Accessed online January 29, 2016 at http://www.gmcboard.vermont.gov/sites/gmcboard/files/PaymentReforp/Payment_Reform_Series_Session7_23_15.pdf