Every payer was supposed to change the way health care is paid. Four years later, this is not the case.

Phil Scott, Mike Smith and Ena Backus
Left to right, Governor Phil Scott, Social Services Secretary Mike Smith and Director of Health Care Reform Ena Backus. Photo by Mike Dougherty / VTDigger

Almost five years after the state ushered in the all-payer model to change the way health care is paid, only 2% of care in Vermonters is funded under the new system.

“It’s catastrophic,” said Kevin Mullin, chairman of the regulatory board for Green Mountain Care, which helps implement the system.

“We have to do better,” said Ena Backus, director of health care reform.

The state’s efforts to reform health care are rooted in the payment changes. The all payers model was created in 2016, as part of an effort to put quality over quantity in healthcare. The methodology: Pay hospitals and healthcare providers a fixed monthly fee rather than for each procedure they have performed.

Almost five years later, almost nothing has changed. Progress has been hampered by a combination of technical challenges, bureaucratic quagmire, and reluctance to opt for hospitals and the people of Vermont.

What is the 2%?

Offering fixed payments to physicians requires two major steps: Hospitals and physicians must first decide to participate in OneCare Vermont, a responsible healthcare organization that manages the system. Insurance companies must also join. Then they have to go for the monthly payment system, called fixed prospective payments.

According to the Green Mountain Care Board, about 13% of total health care spending for Vermont residents is channeled through OneCare Vermont. Only a small portion of this money is delivered in fixed payments. In 2019, according to the latest data available, only 13% of that total – less than 2% in total – came in the form of monthly fees. This means that over 98% of state health care is paid for through other means, mostly on a procedure-by-procedure basis. (Backus noted that part of that total includes other types of payment that reward physicians for better care.)

That number likely increased slightly in 2020, according to OneCare CEO Vicki Loner.

Why has it taken so long?

Backus on Wednesday informed lawmakers of the need to increase the proportion of those fixed fees, but defended the progress the state has already made.

Transformation “doesn’t happen overnight,” she said. “We want to go further. “

The technical and administrative challenges associated with this change are enormous, Loner said. It requires buy-in from all parts of the complicated healthcare system – the state, the federal government, OneCare, insurance companies, hospitals, and doctors.

Medicare, which is administered by the federal government, is not yet participating.

Insurance companies and doctors balked at the difficulty of making the switch.

For example, a doctor who currently bills an insurance company for a patient’s appointment, diagnosis, and blood tests must implement the technical systems to simply receive a one-time payment, Loner said. Insurance companies also need to make substantial changes to their billing and payment processes.

She called the transition a “heavy load”.

In 2020, Blue Cross Blue Shield of Vermont offered hospitals the opportunity to participate in a pilot, semi-fixed prospective payment through OneCare. All but one refused, according to spokesperson Sara Teachout. They were faced with the challenge of transforming computer systems like Epic.

“Then when we got into the pandemic, it all stopped,” she said. When the pandemic ends, hospital interest could increase, Teachout said.

Only Medicaid just got on board. Even then, the insurer pays a portion – around 85% – of its members’ health care costs with fixed payments. That includes the entire 2% figure, Loner said.

Other insurers have taken steps to start paying doctors to keep people healthy, according to Backus. This is not included in the 2% figure, but represents progress nonetheless, according to Backus.

What should Vermont have achieved by now?

The federal contract has no standard for how much care should be paid for with the new payment model, according to Backus. But she said “the majority” of health care should ultimately be paid for in fixed payments.

This means, Mullin said, that the state should now be “at least 25%” away from fixed payments.

“We are way behind,” he said.

What does this mean for the all payers model?

For now, state officials say they remain committed to the all payers model and will continue to push reform efforts forward, despite its shortcomings.

Vermont’s five-year contract with the federal Centers for Medicare & Medicaid Services expires at the end of 2022. Backus and other state employees have already started talks on a second five-year agreement.

Yet the lack of progress has highlighted the resistance of the health system to change.

“I think it’s going to take a lot longer than anyone expected,” Mullin said.

Loner said she was optimistic about the success of the model. “We are further ahead than many, many other states. We take this for granted, ”Loner said. She also said the pandemic has proven doctors that flat payments can be helpful in keeping their practices afloat.

Loner said there was still work to be done. “It’s a trip,” she said. “We have to keep moving forward. “

Clarification: This story has been updated to clarify that Vermont has other types of health care spending, including some “value-based” methods that reward quality care.

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