Health costs: Is Mass. the only model?

What about Vermont? (Not to mention Maryland)

We all know Obamacare is Romneycare and Romneycare is Obamacare and that the Bay State has set the standard for everything health reform—from the individual mandate right down to ways to cut its gigantic medical bill. Or at least the media have passed along that narrative. The Wall Street Journal’s recent piece, “Same State, New Stab at Health Care,”was no exception. But it did not quite tell the whole story. The piece focused on what Massachusetts may be doing to reduce medical costs and overlooked what neighboring Vermont is already doing.

Let’s face it. Vermont is easy to dismiss. Its small population, liberal patina, and the fact that it has passed a bill that might lead to single-payer health care down the road make it a health reform outlier, far less muscular than its neighbor to the south. But we’re remiss in treating it as a stepchild when it comes to controlling health care costs. In many ways, it is trailblazer, and the press should recognize it as such.

The Journal’s piece gave the news: Massachusetts legislators unveiled legislation that would propose setting a target for the rate at which the state’s health spending should rise, which the Journal reported “would once again put the state in the forefront of efforts to remake the American health-care system.” The state, the Journal continued, is considered a laboratory, and if it manages to reduce spending, that “initiative too could eventually be imitated elsewhere.” It quoted a reliable observer from the health care cognoscenti, Paul Ginsburg, the head of a Washington think tank, the Center for Health System Change. Ginsburg said no state or initiative of the federal government has implemented such a broad effort. “There will be a lot of attention to what Massachusetts is doing,” Ginsburg told the Journal.

Anya Rader Wallack, who runs Vermont’s Green Mountain Care Board, took issue with that, telling me Ginsburg’s comment was “inaccurate.” “It leads one to believe there’s no other state working on it,” she said. “The introduction of a bill is seen as groundbreaking, when other states are already further ahead in addressing health care cost containment. “Vermont is one such state. The Green Mountain Care Board, created as part of last year’s legislation that put in place a plan for moving to a single-payer health system, “has broad responsibility and a fair amount of regulatory power,” she explained, and one of its tasks is to contain the state’s health care spending.

How is Vermont doing that?

  • • The state has already set a target for restraining the growth in the budgets of the state’s fourteen hospitals. The hospitals will be allowed only a 3.75 percent increase in net patient revenues for the fiscal year beginning in October, Wallack said.

  • • The board also has regulatory authority over the rise in health insurance premiums charged by the two carriers that sell in the individual and small employer group markets. (It does not have authority over the three insurers that sell to large employers.) The board can override decisions of the state insurance commissioner when it comes to rulings about premium increases for companies selling in the individual and small group markets. In most states, commissioners make the final decision on rate increases, but the industry can and sometimes does challenge them in court.

  • • Vermont also has a huge dataset of claims paid by 90 percent of commercial insurers as well as Medicaid that will enable it to help set hospital budgets and judge insurance rate requests.

  • • Meanwhile, there is the beginning of a unified budget—which will include Medicare and Medicaid—for the state’s total health care spending. This will also help them set an overall rate of growth for medical expenditures. Wallack believes that knowing where the money is coming from and what it’s spent on will help design programs to improve quality of care. “This amount of central planning and regulatory authority is unprecedented,” she says.

Vermont’s efforts begin to end some of the fragmentation that characterizes the way medical care is given and paid for. The unified spending budget, plus the fact that there are few payers in the state, make it easier to move to a one-payer, unified system with public financing that lowers costs for everyone—a goal Vermont hopes to achieve by 2017. Whether that happens depends on the clout of the big stakeholders in the legislative process. “Whatever we learn in Vermont should be a path forward,” Wallack added.

Wallack said she did talk to a Journal reporter, whose story made passing references to other state efforts. So it’s hard to say why the Journal didn’t dig further into Vermont’s activities and instead framed its story as only another Massachusetts Miracle. The paper did note Vermont passed a law last year “that created a new regulator that can attack health costs through broad powers including capping hospital revenue and setting all provider rates.” It also mentioned that Maryland and West Virginia regulate some hospital rates. But the news decision to give short shrift to other state efforts dismisses an important part of the cost-containment story. For that matter, so does its brush-off of Maryland.

Indeed Maryland, like Vermont, has been a leader in trying to control medical spending. The state has had a system of all-payer rates for hospitals for some forty years. That means private insurers, Medicare, Medicaid, and patients who pay on their own get the same bill for a hospital service. That’s a big deal. This spring a young National Journal reporter named Margot Sanger-Katz explored Maryland’s all-payer rate system and found that in 1976 the price of a hospital admission was 25 percent above the national average; by 2009 it was 3 percent below. Her work broadens the dialogue about cost containment and shows the old timers there’s a lot more to report.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , , ,