Mark Hage: Rebalancing Vermont’s Healthcare System and Lowering Healthcare Costs

This commentary is from Mark Hage, Director of Benefit Programs at Vermont-NEA.

This commentary is the latest in a series that included pieces by Patrick Flood and Julie Wasserman. We have joined forces to make the case that a more affordable and equitable health care system is within Vermont’s reach.

But we must act. We cannot wait for the federal government, even as the “Medicare for All” debate continues. It’s our health care system — and it’s failing us.

The Vermont Department of Health’s 2021 Household Health Insurance Survey tells us:

• 2 in 5 (41%) privately insured Vermonters have an annual deductible greater than $4,000.
• 44 percent of us under the age of 65 with private insurance — about 131,000 — are “underinsured.” Being “underinsured” means that your benefits plan does not sufficiently cover current or potential future medical expenses if you develop a serious illness or condition.
• Low-income Vermonters, BIPOC residents, members of a gender identity minority, and people with disabilities are more likely to be medically disadvantaged than other groups.

A Modest Path to Reform

What can Vermont do now to reduce health care costs? And how can we strengthen community care practices in local communities and provide predictable funding to hospitals?

Building on the contributions of my colleagues, I propose these reforms:

• Move hospitals to global budgets to ensure fairer pricing, greater efficiency and sustainable funding.
• Develop a multi-year plan to rebuild the community care sector and reallocate revenues spent on avoidable or low-value hospital care to community care practices.
• Establish a Prescription Drug Affordability Council to negotiate lower prices for expensive drugs.

Global budgets for hospitals

A global budget is a publicly regulated funding system that provides fixed payments to cover the prospective costs of a hospital for a designated population area in a given year. It is a commonly used model around the world.

The main objective of global budgets is rational planning, with reasonable financial controls, in order to provide stable revenues and optimize the delivery of essential services. The development of these budgets is based on several factors: past expenditures, financial management, clinical outcomes, projected changes in service levels, labor costs, administrative expenses, and proposed new programs. .

Global budgets can also set the same prices for the same services (they vary wildly today).

In an article published by the Commonwealth Fund this year, Robert Murray, an expert in healthcare reimbursement systems, discusses fixed and variable global budgets. He generally characterizes global budgets as having “great potential for controlling overall costs, including containing or reducing unnecessary hospital services.”

Global budgets, he argues, can also promote investments in programs that better coordinate hospital care with primary care physicians and expand access to early intervention for patients with chronic conditions. Murray further asserts that global budgets may require “a minimum of regulatory complexity for implementation and enforcement.”

Referral Based Pricing

As Vermont’s comprehensive budgeting system is being developed, I propose that we combine it with a benchmark-based pricing model benchmarked to Medicare rates. This means hospitals would be paid for services based on a multiplier of what Medicare pays.

In 2017, Montana implemented benchmark-based pricing compared to Medicare rates for hospital services for its 31,000 state employees and their dependents. No hospitals were subsequently closed and the cost savings were impressive:

• In fiscal year 2019, average spending per member per month for government employee insurance benefits decreased by 22% for inpatient services and 14% for outpatient services.
• From 2017 to 2019 alone, health insurance costs for state employees have been reduced by nearly $48 million.
• Referral-based pricing “allowed the plan to become more financially viable…without placing the cost on employees.”

Other states, in their own way, have followed Montana’s lead.

Rebuilding and Respecting Community Care

Revenues currently spent on low-value care, emergency room overuse, and potentially avoidable hospital services should be invested in rebuilding community care practices with well-paid providers.

The state must also make a lasting commitment to addressing critical workforce shortages in primary care, nursing, mental health, and home health. That we have allowed their ranks to deplete and expand is a harsh condemnation of those who administer our health care system and of OneCare Vermont, the state’s failing accountable care organization.

Prescription Drug Affordability Commission

Nearly one in four Americans say they don’t take their medications because of the cost. Yet from 2016 to 2020, 14 big pharma companies spent $577 billion on stock buybacks and dividends, $56 billion more than they invested in research and development over the past decade. same period.

Facts like these led Maryland in 2019 to create the first Prescription Drug Affordability Board, a public body of clinical and health economic experts charged with “protecting the people of Maryland and the Maryland health care system from high prescription drug costs”.

Other states have since followed Maryland’s lead. Vermont should be next.

Funding Reform

Patrick Flood recommended that we begin funding community care revitalization with money from the OneCare Vermont budget. I agree. This injection of revenue will launch a broader transformation process that will aim to reduce systemic costs and improve efficiency of care through rational planning and pricing through comprehensive budgeting.

Vermont has spent about $80 million on administrative costs for OneCare since its inception, including $15.4 million approved in fiscal year 2022.

Most of us, however, have no idea what OneCare is or why it exists, as it provides no direct patient care. Since its launch in 2014, the number of Vermonters underinsured with private insurance has jumped 17% (27-44%) and state health care spending has fallen from $5.5 billion (2014) to $6.8 billion (2020).

The Green Mountain Care Board should develop a multi-year plan that would redirect OneCare’s administrative revenues toward these goals:

• Fund tuition grants and debt forgiveness initiatives to educate, recruit and retain primary care physicians, mental health counselors, nurses and home care workers, to begin raising their salaries and to phase out the absurdly expensive practice of hiring “travelling nurses” (in 2021, Vermont spent over $100 million on travelers).
• Improve the financial capacity and administrative flexibility of federally licensed health centers to provide primary care and mental health services at no charge or on a sliding income scale.
• Eliminate non-clinical demands on providers that don’t improve care but take up patients’ time and inflate costs.

Redistribution of OneCare funds by the Green Mountain Care Board is expected to be informed by a task force comprised of representatives from community care practices, hospitals, employers and unions, state colleges, and organizations committed to advancing the health care affordability, equity and protections against discrimination. .

Let’s move on

It is in our power to rebalance the scales of hospital and local care and to restructure the integration of their missions.

By necessity, this means bringing more rationality and accountability to hospital pricing and spending with global budgets. It also requires eliminating or reducing the hoarding of surpluses by hospitals and reducing the volume of practices that get people into emergency rooms and hospital beds.

Finally, the state must force the pharmaceutical industry to negotiate lower prices.

These goals are achievable with legislative will, regulatory will and public support.