We’re hiring a reporter to cover Vermont’s affordability crisis. With support from Report for America and a dollar-for-dollar match from a local donor, your gift will go twice as far through Saturday.
We’re hiring a reporter to cover Vermont’s affordability crisis. With support from Report for America and a dollar-for-dollar match from a local donor, your gift will go twice as far through Saturday.
VTDigger
News in pursuit of truth
Gov. Phil Scott this week signed two significant pieces of health care legislation into law, both of which seek to rein in health care costs while bolstering state oversight of hospital practices.
One bill, H.266, signed on Wednesday, limits the amount that Vermont health care providers can charge for outpatient prescription drugs — medications administered by injection or IV that are often used to treat cancers and autoimmune diseases.
Another, S.126, signed Thursday, aims at a more comprehensive, long-term transformation of health care regulation in the state. Among other items, the bill requires state health care officials to develop a “statewide health care delivery plan” and present it to the Legislature by 2028. The legislation also directs the Green Mountain Care Board to implement reference-based pricing, a system that tethers the prices that health care providers charge to the equivalent rates that Medicare allows.
Taken together, the two pieces of legislation represent a major effort by Vermont lawmakers and officials to curb health care costs while bolstering oversight of hospitals.
The passage of the bills comes at a time when many health care entities in the state are struggling to stay afloat while patients and employers are facing skyrocketing insurance premiums.
“We have no choice,” Mike Fisher, Vermont’s chief health care advocate, said Thursday. “There’s a substantial risk that we’re going to lose key providers in communities around the state if we don’t intervene.”
Among the main contributors to ballooning health care costs in Vermont are the extreme markups that hospitals charge for certain drugs, lawmakers and officials have said.
Currently, the average price of outpatient pharmaceuticals in the state are more than five times the amount of the manufacturer’s average sales price, by far the highest average markup in the nation, according to data compiled by the research and consulting firm RAND.
H.266 caps the cost of those drugs at 120% of their manufacturers’ average sale price beginning in January 2026, a move that health officials say will go a long way toward immediately lowering Vermont’s rising insurance premiums and health care expenditures.
Under the new cap, outpatient drug prices at Vermont hospitals would be the lowest in the nation, according to preliminary estimates. Hospitals in the state designated federally as “critical access hospitals” are exempt from the cap if they are not affiliated with a larger hospital network. That group of six hospitals not covered by the cap includes Copley Hospital in Morrisville, Gifford Medical Center in Randolph and North Country Hospital in Newport.
“It is the most consequential and immediate effort I have heard of to reduce health care costs in the state,” Owen Foster, chair of the Green Mountain Care Board, said Thursday.
Blue Cross Blue Shield of Vermont, the state’s largest health insurance provider, has already said the measure would reduce the insurer’s projected rate of premium increases for next year by an estimated four percentage points for plans offered on Vermont Health Connect, the state’s Affordable Care Act marketplace, and by three percentage points for public school employees.
But advocates for the state’s hospitals argue that the proposal would take away millions of dollars of revenue, requiring some health care providers to drastically tighten their belts and potentially cut staff and services.
“As we do this work, we’ll first ensure we look to administrative and other savings to limit and avoid, to the fullest extent possible, impacts on direct patient care and services,” Devon Green, a lobbyist for the Vermont Association of Hospitals and Health Care Systems, said in a written statement. “We know this will be challenging, but if we work with our state partners, the GMCB and together as hospitals, we are confident we can make meaningful progress.”
Lawmakers and officials are looking to rein in hospital prices in the longer term with S.126, which requires the Green Mountain Care Board to establish a reference-based pricing system for the state’s hospitals by 2027.
Under the proposed model, the Green Mountain Care Board will limit the amount that hospitals charge private insurance companies for patient procedures by pegging those prices to the equivalent rates that Medicare sets for hospitals.
State officials have long trumpeted reference-based pricing as a means of clamping down on rising health care costs.
A 2024 report produced by the care board found that implementing the cost saving system just for state and school employee insurance plans could save the state tens of millions of dollars annually. Doug Hoffer, the state auditor, similarly touted reference-based pricing as a cost-saving measure for the state’s health care system in a 2021 report.
In practice, the measure represents a seismic shift in the way that hospitals price patient care, and it remains unclear exactly how the pricing system would work.
“There’s a significant amount of work to do to come up with a payment methodology for reference-based pricing,” Foster said. “All of these things are going to take a fair amount of time and effort to get it right, and so that’s what we’re initiating.”
S.126 also tasks state officials with transitioning the state’s health care system to a “global budget” payment model by 2030, meaning participating hospitals would receive fixed amounts of money from participating insurers to operate within a given year rather than receiving separate payments for individual procedures.
Vermont already took steps in the direction of establishing a global budget model when, earlier this year, it signed onto a pilot program run by the Centers for Medicare and Medicaid Services called the AHEAD model. The pilot program, if it moves forward, would allow the state to incorporate federally funded insurers into the payment system.
Additionally, the bill would give state regulators more general oversight of health care providers, allowing the Green Mountain Care Board to collect more data and financial information from hospitals for the sake of standardizing pricing and budgets.
Last week, Scott also signed into law H.482, legislation that gives the Green Mountain Care Board emergency authority to reduce hospital prices in the case of risks of insolvency to insurers.
“It just provides a layer of protection for the entire system,” Foster said. “I see that as a critical step in the situation that we’re in, with financial concerns at our primary insurer.”
Vermont’s affordability crisis affects us all — but not in the same way. That’s why VTDigger is launching a new reporting beat focused on wealth, poverty and economic opportunity across the state.
Report for America will partially fund this new role, but they require the remainder come from our community. A generous Vermont donor has stepped up to MATCH ALL GIFTS received by Saturday, June 14.
Will you help us launch this critical reporting position? No gift is too big or too small — and today, it will be doubled.
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VTDigger's business and general assignment reporter. More by Habib Sabet
