The federal government has granted tentative approval for Vermont to establish an all-payer health care system that covers all providers. 

The draft agreement is still under legal review. If it is signed, Vermont will be the first state in the nation to adopt such a model.

The proposal calls for a statewide, risk-bearing accountable care organization, either OneCare Vermont or Vermont Care Organization, to receive payments from commercial insurers, Medicare and Medicaid. Insurers would be required to pay similar rates for beneficiaries’ health care services. The ACO would pay physicians a monthly fee based on quality of care rather than for individual services. 

The goal is to hold annual growth in health care costs to no more than 3.5 percent for five years, starting in 2018. Payments to the ACO, in turn, would increase by a weighted average of 3.5 percent annually. The state aims to have approximately 30 percent of PCPs participating in the model by the beginning of 2018 and 80 percent participating by the fifth year. 

The Green Mountain Care Board, which approves hospital budgets and insurance prices in Vermont, would oversee the ACO. 

Gov. Peter Shumlin (D-Vt.) estimated that the all-payer system could save the state approximately $10 billion over a decade. 

Our Take: Governor Shumlin famously attempted to enact a statewide single-payer system known as Green Mountain Care, which after four years of wrangling, was dumped in 2014. There were good reasons for the plan’s demise—doctors, payers, employers, hospitals and just about everybody else was against it—but the main reason was cost. In 2014, Vermont collected $1.6 billion in revenue. Shumlin’s own projection was that Green Mountain Care would require an additional $2.6 billion in annual tax revenue.

Bolstered by the tentative success of some accountable care organizations, Vermont is betting that its population is small and manageable enough that it can take lessons learned from the ACO model and transfer that knowledge to a state-run program.

The problem is that it’s hard to say unequivocally that the ACO model has been a success. Only a third of the Pioneer ACOs that started in 2011 remain. Three of the 21 Next Generation ACOs launched in January have already dropped out. For every year that Medicare Shared Savings Program participants have released results, about half have gone over projected budget.

At the same time, on average, quality improves year after year. 

The larger problem, as we see it, is that we don’t yet know why some ACOs flounder and others flourish. We applaud Vermont for taking this bold step, but suggest that state officials proceed with caution.

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