Vermont has received tentative approval from the Obama administration to establish an all-payer reimbursement system for healthcare providers in the state starting in January.
Maryland long has had an all-payer system, but it covers only hospitals. Vermont plans to use an accountable care organization-type structure that would cover all providers. All-payer systems require all insurers, whether private, Medicare or Medicaid, to pay similar rates for services.
Vermont says its goal is to provide better quality care and reduce healthcare cost growth. "I'm incredibly optimistic that we can move to (an) outcomes-based payment system with cooperation from the federal government that will allow us to contain costs and to put money in Vermonters' pockets," Vermont's Democratic Gov. Peter Shumlin said earlier this month.
The approval of Vermont's waiver request comes nearly three weeks after Shumlin traveled to Washington to negotiate a deal with HHS Secretary Sylvia Mathews Burwell.
Under the state's all-payer proposal, which is modeled on Medicare ACOs, providers would be paid global rates determined by the patient populations and health outcomes. Fee-for-service payments would be scrapped. Some experts say more states should consider such a system to speed the transformation to value-based payment.
On Wednesday, Vermont released the draft agreement on the Section 1115 demonstration waiver. It's being reviewed by HHS and the state, according to Robin Lunge, Vermont's director of healthcare reform.
Negotiations were drawn out because federal officials wanted to make sure federal costs wouldn't exceed what they would be under the traditional system, while state officials wanted to make sure the state wouldn't receive less money.
If finalized, the five-year demonstration would begin Jan. 1, 2017 and end on Dec. 31, 2021.
Vermont had previously considered launching a government single-payer insurance system like that proposed by Vermont Sen. Bernie Sanders. During his unsuccessful campaign for the Democratic presidential nomination, Sanders proposed a national single-payer system.
But Vermont gave up its single-payer plans in 2014 after Shumlin received estimates that launching the system would cost the state more than $2 billion in 2017 alone. That would have required a major tax increase.
Vermont's system may resemble Maryland's. In 2014, Maryland, which has set rates paid by all payers to hospitals since the 1970s, got federal approval to set a budget for each hospital for all patients. The state promised that the budget would not grow faster than the state economy each year. A commission tracks hospital bills, hospital prices and patient volume.
In Maryland, some early results are promising. Hospital spending grew more slowly than the economy in the first year. Hospitals also saved Medicare an estimated $116 million in 2014, state and federal officials reported in the New England Journal of Medicine last November.