Analysis: Establishing The Health Care Exchange

By Hamilton Davis

The Green Mountain Care Board has established budget targets for Vermont’s 14 hospitals that will add as much as $85 million to the $2.1 billion that is budgeted for the current fiscal year. The actual amount of new money will depend on a series of board decisions on individual hospital budgets before the new fiscal year begins on Oct. 1. The minimum new money would be $64 million.

The budget target was built by assuming that the Vermonters can afford to spend three percent more in fiscal 2014 than they are paying in the current year, with up to an additional one percent more for projects that the board believes will advance the cause of health care reform in the state.

Listen to VPR’s Hamilton Davis discuss Vermont’s efforts to establish a health care exchange on Vermont Edition here.

The budget targets do not include new money that might be spent on hospital purchases of doctor practices. That category generated $36 million in new spending in the current year’s budget. The board resolved to set up a new process to deal with that issue.Its hope is that whatever new money that is called for there will be offset by reductions in spending in the unregulated portion of the acute health care system that is incurred by independent phyicians. About 60 percent of the state’s physicians are employed by hospitals and hence are regulated. The remaining 40 percent are not, but money spent on them shows up on the state’s total health care bill.

The spending level contemplated by the board-which will probably range from 3.5 percent or so to nearly 4.0–represents a significant reduction from this year’s budget increase of 7.1 percent, about three times the rate of inflation in the U.S. economy.

It is still not a sustainable inflation rate, however, and Anya Rader Wallack, the chair of the board, said that can not be achieved until the system can be shifted away from fee-for-service reimbursement and much further integrated to improve its efficiency. “Without changing provider payment, we cannot expect major gains, Wallack said.

In a departure from past regulatory practice, the board said it would establish preliminary targets for 2015 and 2016 to aid hospitals in budget planning. The base level in each of those years would continue to be three percent, but with smaller increments for board-approved health care reform projects. The 2015 increment would be 0.8 percent and the 2016 increment 0.6, a total of $31.5 million in new money.