More On Vermont's Single Payer System, Act 128 and Health Care Price Controls

In response to this pessimistic petulant post on Vermont's health reform initiative, one astute Disease Management Care  Blog reader pointed out that that the Green Mountain State has put a lot of thinking into its single payer proposal.  Can the DMCB seriously dare to question the brainy conclusions of such smart Harvard economists?

Unable to resist, it first looked at Vermont's Act 128.  This authorizes a health reform Commission that is charged with hiring a consultant to present three single payer options to the State Legislature.  Then the DMCB checked out the consultant's report that came out last February.  This is what apparently formed the basis of Dr. Wallack's enthusiastic New England Journal perspective piece on this single payer paradise, this health care haven, this Shangri-La of systemness.

The consultant report is a whopping 184 pages long, so the DMCB rolled up its sleeves, donned its nerdy spectacles and tried to take it all in.  Briefly, the consultant-economists are proposing a payroll tax-funded single-payer system that pays all the claims from all the state's still-independent health care providers.  Basic administrative functions would be put up for bid for management by a 3rd party. The state-run insurance program would provide every legal resident a standard benefits package (while non-residents could 'buy-in').  The fund would be run by a politically insulated Board, populated by state government officials, payers, employers and workers, which would negotiate with consumers and providers over the benefit package and payment rates. This Board could also include health policy experts or put them in a separate advisory panel. 

Based on data from published reports on the impact of various types of health reform plus some economic modeling, the consultants estimate that 1) administrative simplification, 2) reductions in fraud (a single payer would be better able to spot questionable bills), 3) clinical efficiency from 'integration' (like ACOs and medical homes) and 4) a "no-fault' medical malpractice system will ultimately result in a 25.3% reduction or a savings of $1.6 billion in health care costs over a 2015-2024 ten year period. During that time, it will be up to the Board to transition from the current fee-for-service payment systems to quality-dependent, risk-adjusted capitation or global payment arrangements. It sounds like each of the 14 regional community centers would hopefully agree to form accountable care organizations; those that don't would be subject to spending targets. Free standing physicians would probably be subject to forms of capitation.  And, by the way, the savings would fund everything - without any need for additional revenue.

Very seductive says the DMCB.  Yet, based on its more than 1100 posts over three years, this simplistic and naive non-PhD physician still wonders - assuming the consultant report is used as the basis of legislation........

1. Is administrative simplification really that... simple?

2. If Medicaid and Medicare are so vulnerable to fraud, why would a another government-run payer be any less so?

3. If ACOs are really such a savings no-brainer?  Medical homes are a slam dunk (see page 8 of the Robert Wood Johnson Report)?

4. If physician liability reform in today's over-lawyered environment is even possible and if there's a risk that every recommendation will pass in Vermont except a no-fault system.

Unlikely says the DMCB.  If this works and squeezes $1.6 billion out, it will be because the Board will assume that its reforms are laden with savings and impose them in its "negotiations" with the provider community, leading to a very creative but still blunt-force version of price control. 

Hopefully, Vermont's leaders will be vigilant to the twin downsides of any form of cost control and caps, namely 1) shortages of services and 2) profits-before-patients withholding of care.  Hopefully the docs will not settle for anything less than real liability reform. Last but not least, hopefully the taxpayers will realize that once this passes, there is no going back, even if the whole thing fails miserably.

And while it's slightly off topic, the DMCB happily notes that it survived a 5.9 earthquake today.  To celebrate being all shook up, its thoughts only naturally turned to Elvis.  It takes comfort in knowing that there is a little bit of The King in all of us.  Enjoy.