Gov. Peter Shumlin and a team of health care officials announced Wednesday they have a draft agreement with the federal government to overhaul Vermont's health care payment system.

The step comes after nearly two years of negotiations involving the Agency of Administration, the Agency of Human Services, the Green Mountain Care Board, and the U.S. Centers for Medicare and Medicaid Services.

Shumlin and Al Gobeille, the chair of the Green Mountain Care Board, hosted a two-hour news conference to discuss the deal. State officials have not signed the draft agreement, but they may sign it in the next three weeks.

The board scheduled two more meetings on the issue – Oct. 5 and Oct. 13 – and will take public comment through its website. The administration will hold public hearings Oct. 3 in White River Junction, Oct. 6 in Chittenden County and Oct. 11 in Rutland County to discuss the plan.

The payment reform being proposed is called an all-payer model, and Vermont would be the first state to set up the system. Under the model, Medicare, Medicaid and commercial insurance companies would pay doctors monthly fees for taking care of patients instead of pay for individual services.


Specifically, doctors would sign up to be part of one giant organization — called an accountable care organization — that would accept those payments from Medicare, Medicaid and commercial insurance companies. The accountable care organization may be OneCare Vermont or the Vermont Care Organization.

The accountable care organization would then pay doctors for the quality of their patient's care, not the number of individual tests and procedures they perform for the patient. The Green Mountain Care Board, which currently approves hospital budgets and insurance prices, would be the primary regulator for the accountable care organization.

Reasoning from state officials

"We have now a draft agreement from the federal government that will allow us to take on a challenge that I believe affects the pocketbooks of every single Vermonter," Shumlin said at the news conference.

Shumlin said he had three main views about health care when he ran for office: that everyone should have insurance, that the state should have a single-payer model, and that the state needed to slow the rise of health care costs while improving patient outcomes.

Shumlin said the proposed all-payer model is a measure to address his third priority — bending the cost curve on health care while improving outcomes. He said if the proposal works it could save nearly $10 billion over the course of 10 years.

"I don't think any reasonable person would look at these numbers and say, 'Let's just keep doing what we're doing and hope for the best,'" Shumlin said.

Gobeille, the chair of the board, said a hypothetical family of four with a $60,000 annual income in 2015 could spend 38 percent of that income on a platinum health insurance plan. He projected that by 2025, that same family would make more money but spend 56 percent of their income on top-tier health insurance.

Gobeille said that while the projections are substantial, they don't capture emotional pleas Vermonters make every year when they ask for lower health care prices.

Details of the deal

The state of Vermont is proposing to make sure that certain health care costs paid by Medicare, Medicaid and commercial insurance companies grow by no more than 3.5 percent a year for five years, starting in 2018.

To do that, Medicare parts A and B, Vermont Medicaid and commercial insurance companies will need to make monthly payments to the accountable care organization to treat the patients. Those payments could go up by a weighted average of 3.5 percent each year.

The state will not take possession of money that comes through the federal Medicare program. That money would go straight to the accountable care organization, and the organization would only be able to accept payments on behalf of the patients its primary care doctors treat.

The all-payer model seeks to set up an integrated health care system across the state that allows doctors from different hospitals and offices to coordinate patient care. However, the model will not immediately encompass Vermont's entire health care system.

The state is proposing that about 30 percent of primary care providers in Vermont be encompassed by this model by Jan. 1, 2018. Over a five-year period, the state proposes that that number increase to 80 percent.

Gobeille said if all of the primary care providers in OneCare — which represents Vermont's largest hospitals — decide they want to participate in the all-payer model, the state would meet its initial goal of 30 percent.

Floyd Nease, a spokesman for OneCare, said the organization is just diving into what the terms of the proposed deal mean.

Over time, if primary care providers at Vermont's community health centers choose to participate in the all-payer model, Gobeille said, the state might get to 50 percent participation. The community health centers are on track to merge into OneCare to set up the Vermont Care Organization.

Gobeille said any primary care providers who choose to stay outside of the all-payer model would continue using the traditional system that pays doctors for how many procedures they perform, called fee-for-service.

However, he said a federal law from 2015 called the Medicare Access and Children's Health Insurance Program Reauthorization Act puts the federal Medicare program on track to pay doctors across the country for the quality of the care they provide, as opposed to the number of procedures they perform.

Gobeille predicted that as the federal Medicare program starts moving to the new payment method, Medicaid and commercial insurance companies will do the same. He said that means primary care providers might find it most beneficial to join Vermont's all-payer model rather than wait for nationwide reform.

Shumlin said he thinks three weeks is enough time for public comments because the deal has been in the works for two years, and there is a provision in the agreement that would allow the incoming governor to exit the agreement with 180 days' notice.

"Providers are going to get to vote with their feet as to whether or not they sign up for this," Gobeille said.

He said additional details on the financial aspects of the deal will be discussed at the board meeting Oct. 5.