SmartTranscript of House Healthcare - 2025-02-05 - 1:00 PM

[Chair Alyssa Black ]: Wednesday, February fifth. And we're gonna continue, talking about one of the things that we heard about this morning, regarding reference based pricing, get a little bit more in-depth on this, and we have with us Tim Ash from the auditor's office. So take it away, Tim. Do you need us to do introductions? [Vice Chair Francis McFaun ]: I don't think it would [Tim Ashe ]: be beneficial if there are a few new faces on. [Member Mari Cordes ]: Yeah. Great. Can we do that outside of the interview? Oh. [Chair Alyssa Black ]: Oh, yeah. Before we get started, wanted to introduce some people around the outside of the room. We have some nurse midwives and Doulas. Doulas. [Tim Ashe ]: Hi. My [Witness Maria Rossi ]: name is Maria Rossi. I was in this room last hi. Nice to see you. Last year, testifying for Medicaid for doula coverage in Vermont. I've been a doula for about fifteen years at Nite Courtney and started a program at Washington County Mental Health that we serve only Medicaid recipients who qualify for community mental health services. So we're we're just invited in here to say hello today. I'm happy to answer any questions. This is Jamie Martin. Jamie is a cofounder, co director of the Association of Vermont, which is a newly formed association for who was in our state. And I [Chair Alyssa Black ]: have lived experience of being both a Medicaid recipient, [Witness Maria Rossi ]: and she was my. Oh, [Member Mari Cordes ]: thanks for introducing yourself. You. Great. [Witness Maria Rossi ]: Take it away. [Tim Ashe ]: We're on the committee. [Member Mari Cordes ]: Laura, you know, all the help I can do. [Speaker 5 ]: Laura, I represent as a judge. [Member Mari Cordes ]: Leslie Goldman from Bells Falls area. Larry Curtis, Bristol area. Eddie Powers Waterford, Barnett, Marquis. [Vice Chair Francis McFaun ]: Francis Matthew James McFarlane. [Member Allen "Penny" Demar ]: I do a different represent Barrington. [Chair Alyssa Black ]: Alyssa Black, I represent Essex. Daisy Verbecco, I represent Winifsky. Heidi Kritchlow, I represent Colchester. [Member Allen "Penny" Demar ]: Lead page in the court. [Vice Chair Francis McFaun ]: Allen Demar, Enosburg in Montgomery. Great. [Tim Ashe ]: Tanish, deputy state auditor, former legislator. I will keep my legislative stories to myself for the moment. I'm less impressed. So can you, manager, maybe briefly just say the level of depth that reference based pricing was discussed this morning since I was in a different committee? [Chair Alyssa Black ]: We had, testimony regarding different mechanisms that could be used to control costs, and they presented, you know, the idea of reference based pricing, sort of what it is, you know, tying it to Medicare and what other states might be doing, but a very high level of perspective. [Tim Ashe ]: Okay. I you'll just tell me if I'm And you've written with something that you heard this morning. I [Member Mari Cordes ]: take six times. [Tim Ashe ]: What's that? [Member Mari Cordes ]: Take six times. [Tim Ashe ]: Take six times. Well, I I saw who you had on the agenda, and I just I know Chris Kohler, who I know from Milbank, is one of the most, I think, thoughtful, interesting people, and he's been that organization has been a great help to the state of Vermont over the years, also to the Green Mountain Care Board, I think. So he lucked out having him and I forget Elliot I think. Last name. But so, yeah, great people to hear from. So I'm gonna do what I hope is a fairly accessible walk through of reference based pricing, and just stop me as we go. I know how committees work. And I wanna just be clear. We're not the auditor's office doesn't, like, advocate for the legislature to adopt different policies. So I'm not here saying do this, don't do it. I'm here to say this is what we learned when we explored these topics and why we explored them in the first place and what we've learned from some other state presentations that we've participated in. So just wanted to get that caveat out of the way. And to begin with, I wanna share why our office was somewhat interested because reference based pricing, a term that probably just above zero percent of Americans have ever heard, in health care policy circles in Vermont has a little bit more, relevance today in part because of some work we did, but also the, Act one sixty seven report included as one of the foundations that they said would be critical to doing changing the Vermont hospital landscape included some type of reference based pricing, scheme. So and of course, that study was in part done. There was another study that the legislature itself asked for that the Green Mountain Care Board contracted with that was released in December, and I don't know if the committee has received that report or not. Okay. So it's more in the air than it would have been three years ago for sure. But, back in twenty eighteen, I remember come coming across this very story that you're seeing here, and it was also, I believe, on, National Public Radio, had an audio component of it. And found it very interesting because the the Montana State Employee Health Plan was facing a very difficult moment. There was a, a legislature of one party that said, we're tired of seeing the price tag for the state employee health plan go up and up and up, and we are determined not to pay another penny. I'm perhaps oversimplifying, but they said, we're done with these growth growth rates. The governor of a different party, not wishing to cut benefits for the employees, said, well, jeez. There's only a couple ways you can rein in the cost. You can you can either bring in more revenue from the employees themselves. You cut the benefits, or you can find ways to find savings in some manner, including by negotiating better rates with the hospital providers. And so it was a kind of a inflection point in the Montana State employee health plan. And then hearing the, the individual who was hired by the then governor, Steve Bullock, who I think later ran for president briefly, hired someone who had been a health insurance administrator to help them figure out how they might go about reining in the cost of the system. One Vermont high level official in the current administration having met this individual, Marilyn Barker, described her as someone who eats nails for breakfast. Mhmm. She is a very, very interesting and forceful communicator and so knowledgeable about the inner workings that, you know, if the committee continues to think about this, she's someone who you definitely wanna hear from. And she's been doing a lot of work with NASHP, the National Association of State Health Plans. So anyways, that got us interested reflecting back on this because we knew that Vermont's own state employee health plan was seeing rising claim costs. And this graph is the one that was actually in a report that we released in twenty twenty one, and it showed what was then the last complete calendar year for which we knew how much money had been spent. And this, by the way, does not include pharmacy. So the price tag was going up going up. Twenty nineteen, we saw a little bit of a dip. That was before COVID. Subsequent to that, this shows the next four years. And you see that after that slight dip, the cost of the plan just started ratcheting, right back up, including the largest ever one year increase from twenty two to twenty three, hitting almost the two hundred million mark, again, without drugs. So a hundred ten percent increase in, about twelve or thirteen years, at a time when general fund spending is, you know, constrained and people are always trying to find opportunities for savings. So that was the sort of context in which we started looking at this. Today, the state employee health plan and that was our our our focus was the state employee health plan. Today, the problem has become much more concerning, and this is this chart is from a presentation from the commissioners of human resources and finance and management jointly. We're in front of house appropriations last week to talk about one of the requests the administration has made in the budget adjustment bill for, I believe, eighteen and a half million dollars of general fund in part to cut into what is now a deficit in the the fund that represents the state employee health plan. So this chart, like many charts, can look rather clinical and, you know, faceless. But what it's showing is that in the last four years, the the fund went from having a sixty million dollar surplus, if you will, to a forty million dollar deficit. So a system that was very healthy just when we released the report was sitting on effectively reserves of tens of millions of dollars is now forty million dollars in deficit. And as a result, general fund money, which presumably the legislature would love to be spending on other priorities, is going to cut into that deficit, and it's not even gonna cut half of into it halfway. This is on your website, so you can look back at this, but this is the actual annual numbers that are behind that chart. And so you can see that in the June thirty twenty twenty one column where it says net position beginning, that's that starting point. So when I'm saying there's been a hundred million dollar swing, that was the starting point. The negative thirty nine point nine million, that's the where things are today. So a very serious swing, and that is also while premiums have been going up. So additional monies have been coming in from state employees and the executive branch budgeting, and that's the percentages you see with the arrows there. That's the annual premium increases that people who are members of the plan were facing. So with fifteen percent last year. [Chair Alyssa Black ]: Can I just clarify? Yep. So the chart before this, you showed, you know, the ratcheting up of medical behavioral health claims minus prescriptions Minus pharmacy. One ninety seven. And is the graph you're showing us currently that they are spending two hundred and ninety seven [Tim Ashe ]: That is [Chair Alyssa Black ]: or not not this graph, but the next or the next chart. [Tim Ashe ]: Yeah. So that and there's a little difference on the year. So the earlier one was calendar years because that's how Blue Cross Blue Shield, who's the third party administrator, is able to, you know, bucket those things. And then this is the fiscal years. So there's not perfect crossover, but this would include pharmacy. So that would be a difference. So yeah. So, the teachers, who last year, I believe, were in the front of legislative committees alongside the state employees saying we would like to explore opportunities to try to bring in the cost here for our plans, they've been facing a pretty similar trajectory. This one does include pharmacy. They were able to provide it to us. And you can see this number is also you know, it's it's not been as dramatic, the spike, but the actual price tag is quite dramatic, almost well, I don't think they're about over three hundred million. So combined, we're talking well over half a billion dollars now between public teachers and the state employee plan. So the dollars are huge, and it got us as we thought about how would we explore this in a in a user feed way that would help inform discussions. We we kept coming back to all of the work that had been done historically on price variation when people are paying different prices for effectively the same medical service. This chart, which one of our brightest people in our office who have to connect with you lucky for AHS, works for AHS, put together, kind of simplifies it in the most basic terms, But the prices that you see are actual prices that as of twenty nineteen were the types of prices the state employee plan would expect to pay at three actual Vermont hospitals. So simple illustration that, within this fast growing expense, there are these eccentricities that might be opportunities to think about how to drive some savings. These two are perhaps more detailed ways of expressing what the little man with the bandaged head was telling you on the previous slide. So these are two particular medical services, and the amounts associated with each hospital are the median amount that that hospital was paid by the plan, the state employee plan, for that procedure in a particular, calendar year that we were looking at. So we didn't take the the the episode of care that might have been an outlier on either end. We took the median or one right in the middle, which is roughly reflective of what they usually get paid. As you can see, there's really two takeaways from this. One is that you can have two state employees in different parts of the state go to different hospitals, and the plan is neutral. It will pay whatever is the price that is on the schedule, and it can be very, very different. You'll also see, that it's not like every, it's not it's not the case that one hospital happens to always be the most expensive and one always is the least expensive. When if you look at the report from which this is drawn, you'll find that the hospitals are sort of all over the place when it comes to being relatively expensive compared to the others or relatively inexpensive compared to the others. But as I say, the the the plan will pay regardless of where you go for the same procedure. Sorry. Representative points. [Vice Chair Francis McFaun ]: I'm assuming that included in the price for both a CAT scan of the chest and an echocardiograph are, for example, the CAT scan of the chest. There's the technologist who performs the CAT scan, and then there's the radiologist who reads it. And for the echocardiogram, there's a sonographer who performs the echo, and then there's a cardiologist who reads it. [Tim Ashe ]: I will I would have to refresh my memory on the cardiology, which is now a few years old. It was meant to capture that episode of care, which should be inclusive of those things, but I I would wanna confirm that. So don't take that as a as a definitive answer for me. [Member Mari Cordes ]: Lastly. So have have your office, in considering this, thought about who auditors the test and how do they have privileges? And then how that interpretation then gets back to the individual and communicated with the patient when they may get one in hospital d and the next time in hospital j or, you know, sort of an unstable kind of system? [Tim Ashe ]: Our no. The short answer is no. We were looking at the sort of basic question of how much the plan is paying because these are actually based on state employees who went and sought care at these hospitals. We wanted to know, is it different at the different hospitals for what we hope is the comparable service inclusive of the kinds of, layers that representative Cordes mentioned, but we weren't getting into, like, is the care being well managed? [Member Mari Cordes ]: Yeah. You do. But so that's always what's worrying me is how do you actually do it? Correct. So I understand the financial potential. [Tim Ashe ]: Right. I think the presumption the presumption should be and I'm I'm sorry to interrupt, but the presumption should be that most, let's say, employees are receiving care at the hospital closest to them for for most procedures, but not perhaps this the most complex, which might require a UVM or a Dartmouth. [Member Mari Cordes ]: Right. But that if they start doing their research, then they may find that they wanna go down to some southern hospital as opposed to the one next door. And how does that that's what worries me, and I'm just [Tim Ashe ]: And I don't believe that there's anything that prohibits that under the current benefit plan as long as, [Member Mari Cordes ]: like, everything about benefits. I'm thinking about operations from a clinic clinical point of view. [Tim Ashe ]: Yeah. Yeah. That's outside our scope is the short answer. [Chair Alyssa Black ]: I gather. [Tim Ashe ]: So this issue of price variation is a it wasn't like we were the first to be interested in this. The Green Mountain Care Board, this is now a little bit dated, but just conceptually, I feel like it helps it helps us collectively think about why those prices would be different. And, frankly, you'd have to have the people from Wakeley Consulting come in, to talk about the the gory details behind this because this is lifted from their report. The Green Mountain Care Board had, commissioned them to look at price variation, for medical care in Vermont and to try to explain why it's happening. So you see the green and blue components of these, these horizontal, illustrations. Those are what I would categorize as the explainable portions, things that might relate to you're in a higher cost of living area, like, say, Burlington, so UVM. Some portion of the increase there might be because they have different labor costs and different, I don't know, real estate related expenses than another provider. It could be, you know, some demographic factors that explain it in a more rural area. But the key the key opportunity, if there's an opportunity in reference based pricing, I believe, is the unexplained portion. That's the part where you scratch your head and say, well, obviously, we don't know what it means. Otherwise, it wouldn't be unexplained. But they didn't find a good explanation for it, and the question is what's driving that? Is it merely that a hospital has extra I don't mean this in a pejorative way, but extra profit being paid for that particular service. Is it that that provider is inefficient in the way they deliver that service? Is it that they're using, inputs which are, could be replaced with equally, equal quality at lower price inputs for something like orthopedic implants, things like that? So we sense that there was some ripeness, to explore this issue a little bit further. So when we started to look at it, we said, all right, well, who if anyone has really gone the furthest with their state employee health plan and actually implemented something like reference based pricing and tracing back to that original story, Montana was really the one with the most comprehensive approach at that time and the one that had been analyzed by independent analysts, which was a helpful thing from a auditor's office point of view. And they what they what they did was, I would describe as, they took a a more exhausting and complicated route, which is they went to all the various hospitals in Montana and basically negotiated hospital specific percentages of Medicare that they would be willing to pay from their state employee health plan. So it's not like a one size across the board, approach, which others have used. This was the result of the analysis that was done, to see whether it had been producing savings over what the plan otherwise would have anticipated paying. And what you see is about, you know, a little bit more than fifteen, almost sixteen million bucks a year for each of the first three years that this was in operation. The sort of a side story was, while this whole approach had been the result of a bit of a political fight between the legislature and the executive branch. In the end, this was actually quite popular so much so that a a a member of the legislature who had been very at odds with the governor on many things was actually mentioning reference based pricing in the state employee health plan in Montana in his campaign ads, TV ads for congress. So it had it had it had sort of broken this curve enough that people were talking about it in Montana. And so, anyways, for what it was worth, it seemed like in the end, despite it being the result of partisan friction, it had achieved considerable partisan agreement. So when we started digging in to those earlier charts that showed the same procedure and how much different hospitals were being paid, we tried to say, okay. Well, what what would it look like to actually implement such a system like Montana here in Vermont? And this is what I hope is a pretty user friendly illustration of what it would look like. Now we didn't wanna be in the business of saying, oh, well, Medicare offers this and Vermont should do two hundred and twenty percent or two hundred twenty five. Like, that just didn't seem like a good use of our time. What we wanted to do was illustrate something different, which was just if we knew that hospitals were performing this at at rates that vary widely, what would happen if the state plans that we're going to pay something like the middle amount? So if there were ten eleven hospitals, the one that charged the sixth highest or lowest, depending which direction you took it, and what if that was the price that the state plan said we're now not willing to pay more than that to any provider, and this sort of illustrates it. Now if we had said the state employee health plan, you know, maybe a way of looking at it would be they should pay, like, a two hundred and sixty percent. Yes, two hundred sixty percent of Medicare, this would be the same graph right here. Right? Because instead of about a thousand dollars, it would set the price at about twenty six hundred. So what this does is says, okay. The median price was what would have been the case without reference based pricing under this theoretical scenario. And if we looked at that midpoint price of twenty six hundred fifteen dollars and said that's what the state plan's gonna pay pay for now, Clearly, the ones that were above that would have to drop down if they still perform that procedure. And we tried to say, okay. Have they done that? What would be the effect financially? And, basically, you're taking the difference between what those hospitals were charging before, the new price that's been set by the plan, and then multiplying it by the number of visits or procedures that were actually performed. So this was based on a particular procedure in a particular year, but it's actual numbers at the time from the state employee plan. [Chair Alyssa Black ]: Are you are you raising the price that the hospitals below are paid? [Tim Ashe ]: That's a good question. Because in Montana, the question was, won't the ones who are below just raise their price to that new one and then cut into what you had hoped for would be some of the savings? In Montana, I believe they were silent on that in the design of their program, but they did not observe that occurring. And when I get to, Oregon's experience, I'll mention how they handled that for the same, with the same fear. But that's something that would be a policy a policy question. Right? Would would you allow someone who previously had been paying charging less than this new set price? Would you allow them to raise their prices? That's a policy question, which Oregon in particular has had their had a response, which I'll share. [Chair Alyssa Black ]: Is this less reference based pricing or more just pay parity? [Tim Ashe ]: This this was a equivalent to reference based pricing. This was trying to say our reference, if you will, was just not tied to Medicare. We were tying it to the historic median across all Vermont hospitals. But the same effectively, it's the same application. So we didn't look at the entirety of all procedures being provided to state employees. That's a huge list. It would have not been worth the effort in terms of illustrating this particular policy question. So we looked at thirty nine procedures, which are all in the back of the report that we, produced so you can see them. And for those thirty nine procedures, we thought it would save about three million dollars a year, and that was doing effectively this exercise for those thirty nine procedures, taking the difference between what the facilities have been charging before, what the new price is, taking that difference and multiplying it by the number of procedures laid out across all medical services at the time. And again, this was data from twenty nineteen. We thought that it would save a little bit more than sixteen million dollars a year and had that potential. These were all rough numbers again because we weren't we weren't designing a new state employee health plan. We were trying to explore a concept and see what that might look like to help inform discussions. So the question the the questions we posed at the end of our report, you know, basically fell into these categories. And, you know, we we heard even when we were just doing this sort of thought exercise for this report, people concerned that it might have an impact on employee choice. Would that mean that some people wouldn't be able to get care in their own community, which has not been the experience in states that have implemented such programs, but is a valid concern that you would want to explore and be comfortable with. Is it consistent with these broader health care reform concepts, value based payment, global budgets, things like that? We believe that it is not inconsistent with those strategies. It is merely a sort of cost containment strategy within these larger frameworks of global budgeting, but that's another policy question that the administrators of the plan and legislators and others have to look at. We also found it intriguing the idea that the state employee health plan, which covers somewhere around fifteen thousand people, would be an interesting pilot, if you will, if this was a concept that had some relevance at a larger scale. It's very hard, as you all know, to immediately go full bore on any major policy change, especially one that relates to probably the most sensitive thing that can happen, which is people's medical care. You wouldn't wanna do things without being confident that you had, teased out unexpected, effects of of the policy you were doing. And we had recommended at the time, to the people in the fifth floor, that they kick the tires a little bit on this, and we, connected them with Marilyn Bart Bartlett, who had designed the Maryland system. So that was our sort of intervention was to say, the state employee plan is reaching a tipping point, and that was when it was still healthy. And that at some point, there are going to be difficult questions being asked. And the longer people postpone that conversation, the more dramatic the responses are gonna have to be. I think eighteen point five million dollars of general fund and budget adjustment is a pretty dramatic intervention, and that's gonna be probably requested again either in the budget or next year's budget adjustment because the deficit is just growing. The question of employee benefit levels, I'm sure there will be people saying, well, maybe that's time to reconsider that. Employee premiums, they pay. It's an eighty twenty plan right now. All those things are the the logical discussion points that come when you have a plan that has faced some of these challenges. So I'm gonna quickly pivot to Oregon because Oregon, I think, is the state that has the most, experience, at this point that's illustrative of the conversations that are happening here in Vermont. So, Oregon, unlike Montana, has, gone forward with a reference based pricing plan for both state employees and, school districts and also their state university and college system, but the key being both the state employees and the being asked to admit Brian Sheena. I don't wanna if I exit out, I did this birthday, do I Yeah. Admit. Yeah. I'm using it. So they include their teachers and their pub their state employees in the pool. So as you can see, it's considerably larger than Vermont's pool of of comparable public employees by about ten ten times the amount, and it reflects a pretty significant percentage of of commercially insured in Oregon, fifteen percent. I think that's exceeds what the case would be if we took Vermont's public teachers and public employees and put them together. They had the if if you went to the Oregon health care authorities website, you would you could almost transport yourself to Vermont. They're having all the same discussions that you have in this room and have been having for years. They talk about reforms, sometimes using different terminology, but they're talking about global budgets. They're talking about value based care. They're talking about all the same themes, and their level of public investment in public health and in health care for people with income challenges have been comparable to Vermont. They're in a group of states that are sort of similar. So here, you see kind of a, I don't know, a little bit of a clunky visual from a presentation that I I was I participated in of their price variation. So, basically, those blue and yellow squares and all the little circles represent price variation across Oregon's hospitals. And so they had the same kind of, you know, discrepancies and what was the plan would pay out for the same procedure depending on where it was occurring. So they also had financial constraints. They were seeing the same types of growth that we've been seeing in Vermont. And they their legislature took action and said that they were putting instead of merely guiding their administrators of their plan to meet their statewide growth target of three point four percent, they actually legislated a basically, a cap on what the plan could pay out. So it wasn't wishful. They said, no. No. No. You'll get three point four percent growth. Like, that's it. That put administrators in the position of saying, well, if we're allowing people to continue to receive the benefits they're entitled to, that means we're gonna have to do some negotiating or find some way to bring those prices within that three point four percent target. So they took a different approach than what I described with Montana, whereas Montana went almost hospital by hospital and did kind of a fine tuning. They said we're gonna do a two hundred percent cap, a two hundred percent of Medicare as their reference cap, for the services that they were gonna do. And they focused it only on hospitals and not not to not not on hospital care. They exempted as you can see, they exempted twenty four out of sixty two hospitals in the state. So they exempted basically the equivalent of what we would call critical access hospitals. They presumably just as if whoever follows me later today, I presume there will be people saying my small hospital can't face this uncertainty, and therefore, please don't do this. I presume that's what happened in their state, and they said the volume and cost associated with those small hospitals is such a small piece of the puzzle. Let's just not even risk this, and they moved on and focused on the larger hospitals. So that's that's the reason they exempted twenty four. They did not find that any hospital said will no longer participate in this in this collective pool that is now subjected to this two hundred percent of Medicare cap. They did hear concerns from hospitals that this would be harmful in terms of their ability to continue to deliver services at the level that were being served, although the Oregon Health Care Authority officials have said there has been no noticeable change despite this going into effect. I presume if you put the Oregon Health Care Authority officials in a room and then you took the hospital officials and put them in another room, they might tell different versions of what they have experienced under this program. But the hospitals continue to provide services to all the state employees and public employees who come in, and they haven't, seen the kind of negative consequences that some people had feared. And to the extent you're looking to speak to anyone, with firsthand knowledge about this, I have the contact to me a little bit later of the, person who gave this presentation and who manages their system. And she's very, very clear like, very clearly spoken and could answer all the complicated questions for which I don't have the expertise. So how have they done? And again, this comes from an independent analysis. And you'll see in those first two years of full operation, they served saved about one hundred and sixty million dollars over what they had otherwise expected to pay and would have paid under a typical fee structure from before this system was implemented. There's an interesting note here. I'll I'll just skip that one showing on the slide. You know, you might ask the question, why was twenty twenty why was it so much lower than twenty twenty one? And some of it is probably because of COVID and people were not coming in in the same way for medical services unquestionably. That was an issue. But they also found that it gets to your question, madam chair, from before about will will some providers just raise the pay to whatever that reference price is. In this case, because they had said two hundred percent was the the percentage of Medicare, there are many procedures that are below two hundred percent. So they were coming up and charging at a higher level than before, and OB GYN services were one of the ones they flagged. Medicare probably doesn't know a heck of a lot about that Mhmm. To begin with, but it's not their primary focus. And so they adjusted after they inch initially set out this program. They made some adjustments after they learned some of these lessons and basically said that the reference based price was two hundred percent or whatever the contracted price had been before, basically closing off that opportunity for some to, receive higher payments than they'd even been willing to do it for before. So those are the kinds of lessons learned that I think the officials from Oregon could share with you and, really provide some illuminating, stories. The some of this is so in the weeds that I I I'm not sure that it's particularly helpful other than, I point out that in the the first two dashes under the first bullet, you see what the the hospitals that were included in the program. So the ones that they that remain subject to this new reference based pricing scheme, what their Medicare, percentages were prior to implementing this system. Then when you go to their next slide, you see what the outpatient and inpatient were after. Right? So many of their services are already well below two hundred percent of Medicare, but the effect of bringing down the two hundred, the ones that were well in excess of that, made that fundamental change. So if you were to ask me, like, how did the hospitals manage that, I couldn't tell you the answer to that. But, but the officials, this this individual in particular, was presenting in front of a Johns Hopkins Health Policy Center kind of get together, which was almost entirely focused on whether any states had found any way to rein in hospital spending, because states are all facing the same issue. And so, Margaret was was just really pretty dazzling in terms of her knowledge, so I couldn't recommend her high enough. The other state that is also, an interesting one, because they have a reference based pricing, program in place, but are now contemplating doing effectively what Oregon has done, is the state of Washington. So they have reference based pricing in their Cascade Select program, which is effectively their Vermont Health Connect. And so they as you can see, they've capped all payments in aggregate at hundred and sixty percent of Medicare. I presume this was to try to keep the plans as inexpensive as possible. And that has been in place now for, I believe, five years. So they have a track record and can speak to whether any of the individuals who are on there, but willing to Vermont Health Connect have suffered any access issues as a result or if they've heard that any providers have been required to make any undesirable changes as a result. But they are now their health care authority, interestingly, they kind of put they unlike our Green Mountain Care Board who's somewhat similar, the Green Mountain Care Board doesn't really propose legislation, though they can advocate for changes that might affect their work. The state health care authority in Washington, they're actually proposing that statute be changed to adopt something very similar to what Oregon's done. And they're doing it because they are desperately trying to rein in hospital spending. Washington state also is is in that bucket of states that are all looking at how to look holistically at health care spending. In Washington state, one of the reasons they wanna bring down, particularly outpatient hospital services because that's where the biggest savings are likely to occur is because they believe that mental health and preventive care have been receiving reimbursement rates that are too low. So their proposal is actually to take a substantial portion of the savings and redeploy it back into those other critical interventions, which we know in Vermont it's the same story. So when I say that this is not conceptually inconsistent with many of the reform efforts, I think Washington's proposal kind of speaks to that better than I can. They're trying to save money on one end where they believe it's inefficient so they can put it into areas that have been under resourced for a long time. And then the last slide, this is just on our report. You can pull this up, and it's kind of helpful because the first reaction I feel like of many state employees, members of the public, hospital officials will say, well well, jeez. Like, how is this gonna affect the hospital near me? Or if I'm a state employee, I might say, well, what if there was a what if there was a, you know, unintended consequence that was gonna restrict my access? And then also to think, well, what if Vermont took the approach these other states have done where they've tried to inoculate the very smallest, most rural hospitals? How would that affect the potential for savings? Basically, this is a heat map of where Vermont state employees live. So the darker the blue is where the highest concentrations are. And it makes sense that the hospitals are where there are more state employees, but you see the I would we have the actual raw numbers behind this, but I just felt like this was this is a a very transparent way of communicating how it might look if you were to say, critical access hospitals in or out. Like, how would that affect the actual population of state employees? School teachers are obviously a very different story. They're gonna be much more. Even though there's gonna be higher concentrations where the population is, it's gonna be far more coverage across the state. And this our our analysis did not include them. So I have kind of exhausted our limited role at this point in what I've shared with you. What you'll see if you do a deep dive into the report that was done at the legislature's request is they say something it's kind of a great headline, Four hundred million dollars of savings in the last four years if we had done two hundred whatever percent of Medicare. So that comes with certain assumptions that it applied to all hospitals, that it applied to all hospital services. So those are the kinds of things that when you if if and when you dive deeper into this, you would wanna be asking some of those questions so that you knew quite what you were getting into, where the potential savings might actually occur, whether there are certain procedures that you wanna stay off, you know, keep off limits. But I think that I I as someone who isn't as immersed as the folks around this table anymore in health care policy, having listened to the the the people from Oregon and Washington State, I found that it was really instructive. So, I would definitely encourage you to reach out to those practitioners. [Vice Chair Francis McFaun ]: Thank you. [Chair Alyssa Black ]: Does anyone have any questions? I have a couple questions. Oh, Daisy? Was the Washington proposal you were referring to, was that to the state Medicaid authority, or is it a legislative proposal? [Tim Ashe ]: It's for the legislature. So it's they were it it's drafted, and I'm assuming they're in the same stages of their legislative process as we are here. But that would go to the legislature. And the and the Oregon it's an interesting question. If if we're just talking about the state employee health plan. The legislature, of course, could weigh in and say, do this. Don't do bad administration. They've changed the law. You have to do it. It's not clear that legislation is really required in the sense that the employees have a negotiated benefit with the state with the pay structure. Reference based pricing doesn't really impact that at all because it's really the relationship between the state's treasury paying out the bill to the providers. The employees probably wouldn't even know that the program was in place. So it could be done administratively. It could be done legislatively. In Oregon, it was done legislatively, and what they're proposing in Washington is legislative. [Chair Alyssa Black ]: A lot of questions except me, I guess. [Tim Ashe ]: She's a better story. [Chair Alyssa Black ]: So, no. No, actually, because back to one of your stories, it is sort of my question. I'm wondering if other states and you kind of touched on it briefly, but I've been thinking about reference based pricing more in terms of what we're trying to do around hospital budgets, global budgets, And, you know, the idea that there are certain services that we want in certain areas and others that maybe are more efficient in other areas. So, first of all, you talked about labor and delivery or, you know, pregnancy care. I think you made a comment which, you know, it gets into the fact that that there's there's values, you know, RVUs, which are assigned to all services and that sometimes some RVUs are underweighted and then relative value unit. So, basically, how much is the service worth, which ties into how much Medicare pays. So, when you're basing your your reference based pricing on Medicare, you're making the assumption that the value of all services are equivalent to what Medicare currently has assigned them. But as we move towards more of a global payment model, are there states or is there ideas around using reference based pricing instead to sort of incentivize the areas of our health care system that we want to shore up support. Mhmm. It incentivize and then using it on other services that maybe are being overutilized. Yeah. I don't know. Between, say, primary care outpatient versus the MRI that you gave an example of. Well, interestingly, [Tim Ashe ]: there are large private companies, like very, very large corporations who manage their own health insurance. They're self insured, and they're taking action and saying, we're not paying huge prices anymore. Like, if you want our business because we have lots of, employees who seek care, you will get paid this price. Like and they make people sometimes bid to have the right to provide those services. So that's a rather that's that's like what a competitive environment would, right? Like they're saying, we can take our business somewhere else, so you'll give us the best price that you're willing to do it for, and that's what we'll then pay you. But we're not going to pay that plus all sorts of unexplained amounts anymore. If, you know, we were, you know, looking to buy clementines and I could buy one for Representative Houghton and it was, you know, dollars twenty for this. And then over here, I'm being charged ten dollars and I'd say, Representative Houghton, why is it twenty? Well, she might say, Well, our orange trees are much taller, so we have to have this equipment that takes a little cost to get to them. And I'd say, okay, that's okay. So that's twelve dollars maybe, but what's the next eight? And then we might slowly whittle to a number at which Representative Houghton would still sell me this orange, but it wouldn't be that original twenty. We know that hospital care doesn't really work that way in Vermont because we have a system of basically regulated monopolies, but where the price has never really been a major focus of regulators or policymakers. It's been focusing on the kind of top line number in growth. So in a global budget I'm oversimplifying in my mind. The global budget's philosophy is once the hospital is performing the services we want it to perform and we think it's at an efficient price, then we'll give a healthy inflator over time to help cover the increased price of costs. But you would want to make sure that you were truly paying the right price when you start. Otherwise, that inflator includes a lot of that unexplained. It could be that it's just being done inefficiently. It's being done with the wrong inputs and so on. Only by extracting that unjustifiable difference Can you free up money to put into the things that your values say have been underpaid? And I have a somewhat radical way of looking at this, which is I believe that if you start with the presumption that we pay too much, then the corollary is that we should pay less. But the only way to pay less is a combination of all of the upfront, you know, more coherent primary care and prevention and those strategies, which the legislature should be commended as focused so much on. But the other way is you find savings where the prices can't really be justified, so you can redeploy those dollars. And it's important that it's not being perceived as a tool that would punish one particular facility because that's not what it is at all. To use an example, let's say, hospital x, we won't pick a name. Hospital x is the notoriously high priced hospital across most services. But they also do a lot of primary care. So on the one hand, they may be asked to receive less in payment for some of their specialty services, but then they get some of that money back flowing in through their primary care reimbursement. So it's not a punitive concept. It's meant to be applied to achieve the kind of objectives I think that are motivating this committee in the first place. Again, I'm not here to advocate for doing this, but rather just to provide the little bit of information that we we dug into. But at one point, that becomes like a really important question is can we have a healthy global budget construct if we haven't really assured ourselves that the facilities themselves are operating as efficiently as they can? It's different if you're an independent practice where you have to pay the bills or you go out of business. Our hospitals haven't they don't experience it quite the same way, and so that efficiency test of being able to do things a little bit more inexpensively hasn't always been the same pressure on some of the facilities that would be likely covered under a program like this. [Member Mari Cordes ]: Anything else? Oh, Laurie. I just [Chair Alyssa Black ]: I'm I'm not sure you [Speaker 5 ]: can answer it. The thing that concerns me, both in the last presentation and here and all of the time people talk about reference price pricing is there's been nothing that shows us what happens to access, utilization, prices for other things. So I'm just curious. In your research, did you come across anything? [Tim Ashe ]: Yeah. It's it's mostly coming across nothing, if that's possible. [Vice Chair Francis McFaun ]: Yeah. [Tim Ashe ]: That challenges our logical, capacity to find nothing. But the Oregon experience and Washington state both did not detect a couple of things that you just mentioned as potential worries. They did not detect an impact on hospital service delivery. So there weren't services being curtailed. There weren't employees who no longer could go to a particular facility. So they didn't see that occur. They did not detect that it was having an impact on commercial payers. Is it that they didn't detect it, but it's there? That I can't answer, but they didn't detect it, and these are the people who know more about their systems than anybody else. So I think if the, officials from Washington or Oregon were sitting here and they answered your question, they'd probably say, yeah, those are real concerns, but we haven't seen it. [Speaker 5 ]: But have they studied it, I guess, is my question. [Member Allen "Penny" Demar ]: That's and that's [Speaker 5 ]: like what is Yeah. [Tim Ashe ]: And I don't know what it means study it. I mean, they've got they, you know, they would hear howls presumably from the covered people, if they couldn't get care where they'd always received it. Presumably, the hospitals themselves, more than just being ideologically opposed, would say, as a result of this, we had to make these changes. They have not reported that those specific things have happened, but I'm I'm the secondhand deliverer of that right now. And, of course, all these questions have to be compared with the alternative of doing nothing, which is that care is being challenged right now under the status quo. So it's it's like, you know But [Speaker 5 ]: the the the other options are out there too. [Tim Ashe ]: Yes. Yeah. Everything's being everything is in the mix. So I I totally agree. And doing nothing is a risky strategy. And Springfield would be a case in point of, like, what it means to do nothing to them. Then it's hard to get back to a healthy side. Thanks. Yeah. [Member Mari Cordes ]: Oh. Copper? Oh, let's go to [Chair Alyssa Black ]: Copper and then Al. [Vice Chair Francis McFaun ]: I have a quick one. How do payers feel about reference based pricing? How how would they react to that? [Tim Ashe ]: That's a good question. One of your I think your subs subsequent witnesses is probably better to speak to [Vice Chair Francis McFaun ]: Okay. [Tim Ashe ]: In the case but one important distinction because there there's there's the, like, what if the whole state did it and how it would affect all the payers? And then there's the what if it was the state employees or the state employees and public teachers. Those are in the case of the state employees, Blue Cross is a third party administrator, so they kind of do what they're contracted to do, work with the state on what's reasonable, I presume. And then VHII manages the public teacher system and in a self insured pool as well. So they're a little different than, you know, like Blue Cross or MVP as a general commercial payer, but I'm pretty sure you'll hear from someone more expert than me. I was just [Vice Chair Francis McFaun ]: no reply. [Chair Alyssa Black ]: Looking not looking at our agenda. [Vice Chair Francis McFaun ]: Not being a judge. Thank you, Fiona. [Tim Ashe ]: You're a new legislator, Sue. [Member Allen "Penny" Demar ]: You know, you're learning to roast. And you're [Tim Ashe ]: gonna pause that agenda work again. [Chair Alyssa Black ]: I'm not in class at Trent. Thanks. [Vice Chair Francis McFaun ]: What what's the cost of overseeing this and who implements all this stuff? [Tim Ashe ]: It's the so the same employee plan is managed by DHR. They have a relatively small team who oversee the plan today. They basically delegate out the actual management and all the billing and all the other two Blue Cross Blue Shield, and you'll hear from Sarah, I think. So in terms of cost, I presume there would be an implementation cost, you know, to come up with if you need to propose the simplest scheme might not cost much money at all. If you just say it's gonna be two hundred percent of Medicare and that's the way it's gonna be, it doesn't take too many consultants in a room to figure that out. If it's gonna be something that's more nuanced, then clearly it starts to ratchet up the time it would take to implement something and the cost associated with answering the types of questions you might have. The teachers plan, the VHII, would be the equivalent. They have a long history of aggressively managing their program and so I don't know that they would need more people on an ongoing basis, but they might have the same kind of upfront expense. [Member Mari Cordes ]: Lastly, it's just an announcement, not a question. Erin, our intern, did a summary of the Green Mountain Care Award reference based pricing report that she sent to everybody. Just a reminder that it's somewhere in your email. And if you need it again, there may go. [Chair Alyssa Black ]: Right. Well, thank you. Well, [Member Allen "Penny" Demar ]: thank you. [Chair Alyssa Black ]: Thank you. Being here. You're very helpful. [Tim Ashe ]: I don't know about my Clementine example, but what what materials I had. [Chair Alyssa Black ]: Yeah. Upload what you've got. We were we were scheduled for a break, but how does everyone feel about this power and, [Member Allen "Penny" Demar ]: through? You [Chair Alyssa Black ]: wanna take a break? [Vice Chair Francis McFaun ]: I I'm gonna do it anyway, but I can go do it. Everyone else can sit here. [Chair Alyssa Black ]: I'm gonna say we power through, and, Topper, you take care of your knees. [Member Mari Cordes ]: I'm gonna take care of my Okay. Put my knee up. Okay. My little spot over there and trade places with Adam. [Tim Ashe ]: Yeah. I think so. Oh, before I we've just released an audit of Blueprint yesterday. It's it requires you know, it stands for itself, but we're happy to come in and chat or chat with someone on the committee who can maybe help inform others. It's it it looked at whether how blueprint determines its effect on cost and quality and whether it can and whether it's doing that. So happy to chat about that some obviously, some other time, which [Chair Alyssa Black ]: is Thank you for mentioning that. You. Can you send that [Vice Chair Francis McFaun ]: to Kristen, our community assistant, [Chair Alyssa Black ]: to make sure that she just attributes it to all of us. Absolutely. Sarah, you wanna come on up? [Witness Sarah Teachout ]: Afternoon. Echo, thank you. Sarah Teachout representing Blue Cross and Blue Shield of Vermont, and and I'm just gonna talk high level about our perspective on reference based pricing. I didn't bring a presentation other than the document I had emailed you all last week, comparing costs for Blue Cross members across [Witness Maria Rossi ]: our system. [Chair Alyssa Black ]: So I [Witness Sarah Teachout ]: think it's helpful to have that in the back of your mind as we talk about what reference based pricing could do or couldn't do. In principle, Blue Cross and Blue Shield of Vermont supports reference based pricing as an approach. It could be used for a number of different things, but I think one of them would be a means of rationalizing prices across our healthcare system. And that's one of the reasons I sent you that report. You can see the differences in prices at different, facilities for the exact same service. I mean, that's one thing that reference based pricing could do is make that make sense, I think to consumers. Another thing that reference based pricing could do, depends on how you do it, is, control the growth of costs, prices in our system. So that would be, you set the reference based price, and then you say it could go up by a certain percentage every year and not no more than that. So it does it more at the, like, very specific service level than the way the Green Mountain Care Board is doing it now, trying to control the total budget of a hospital. So it gets really a lot more into the weeds of what they're doing. We also would support reference based pricing if the decisions about the reference based pricing system are made centrally by a regulator that has oversight over the entire system. What we don't want is, I'm going to say, more like what Montana did with a private entity making a decision about reference based prices for one corp. We really want it to be system wide with a view of the system and also looking at the consequences and whatever. We also would prefer it if a reference based pricing system was put into effect that it's for all commercial payers together and not benefiting one employer group over another or one commercial payer over another, we would really like it across the entire commercial pay system. Then some other thoughts, because there's a lot of different ways to think about how you would implement it. We believe you would probably wanna phase it in. So I think what Montana was doing or what other states have thought are by doing it by the by the employer group. So if you start with just the commercial employees or the teachers, we think that it would make more sense to do it by the either the facility where you're going to do the price or the type of facilities that you're gonna do the reference based pricing and then also the services. So there's certainly some services that would be easier to set a reference based price for than others that are more I guess the example I'll give is an MRI, just the image should be pretty similar across any facility, and that was one of the examples in ours. You know, when you go for an MRI, there could be any difference in the machine or in the person who reads it, but generally it should be the same service provided, so setting a similar price makes more sense there than it would be for other services that could be really different in the way that they're delivered. And then, you certainly can another way we would think you would want to phase it in is the percentage of Medicare that you set the price, right? So going from we know that we have a system now that's three hundred plus percent of Medicare in some places. Going to two hundred would be a shock across the system. So you really would want to probably phase that in, or the entity that's overseeing it would want to do it that way. So those are the three ways you could phase it in, by the types of services that you apply the the reference based price to, the percentage of Medicare, if that's what you're choosing as the reference, and the providers within the system. The one thing that we don't want you to phase it in by is the employer groups of the commercial base. And the last thing that I thought about, with, the question that Chair Black asked about incentivizing prices, I think once you have a reference based pricing system in place, or as you're building it, you certainly could think about ways to incentivize different services. If you had a higher reference price for primary care than you did for hospital based services, that would say to people in the system, that's what we want to spend our money on. So it's certainly kind of a more complex nuance, a possibility in the system. Blue Cross and Blue Shield of Vermont does not do reference based pricing for any of our customers, but there is I know of at least one Blue plan that does do it here in Vermont. So they do set prices based on a Medicare reference. So it's not it's not common here, but it has been used. And that's all I had. Certainly happy to answer questions. [Chair Alyssa Black ]: Keeping in mind your suggestion that if we're going to do it, we do it for everyone, how many, Vermonters do you insure under the teachers health plan? If not, how many do you insure under the state employees health plan? [Witness Sarah Teachout ]: Yeah, I'm sure the teachers and the state employees have their numbers. I think it's seventy or eighty thousand altogether. Those two groups. [Member Allen "Penny" Demar ]: Right? About sixty thousand out of norm, the FDA. [Chair Alyssa Black ]: Okay. And sixty thousand in Any between the both? [Member Allen "Penny" Demar ]: Between them both. And it would have been higher, but the NEA, remember, had their post acute sixty five sub retirees full of Medicare Advantage. So Okay. [Chair Alyssa Black ]: I think Tim had mentioned that I I can't remember if it was Oregon or Washington, but fifteen percent of the commercial insured were under there. So if we're talking sixty thousand people, that's actually more than fifteen percent. It's close to It's a good number. The I can't do the math in my head, but yeah. [Witness Sarah Teachout ]: It's close to twenty percent. It's a good number who you'd be excluding where people purchasing on the individual market through the Affordable Care Act, the small groups, and then large group fully insured, and then the self funded groups. There's a few the teachers and the state of Vermont employees are the two largest self funded groups, but there are other significant self funded employer groups. [Member Mari Cordes ]: Lastly? Quick question you probably don't know. [Chair Alyssa Black ]: I love those questions. So I give you a pass even at [Witness Sarah Teachout ]: the beginning. [Member Mari Cordes ]: You just said you had a small amount of experience with this in one of your plans, and has there been any confusion where patients are acquiring tests or reports? And that that I just wanted to understand how that and sorry about that that I put you on that spot. But I'm just trying to understand the operationalizing it from a clinician point of view. [Witness Sarah Teachout ]: Yeah. I great question. I don't think patients understand, for the most part, how their their care is paid for or the price for the things that they're receiving. But my understanding, I think, in your model was, well, you [Member Mari Cordes ]: know, you go down the block and you go to one car dealer and then you go to the next and you compare prices. So my understanding, and I may have this wrong, is that you're asking individuals to compare prices hospital a compared to hospital b. Having so help me understand that better. [Member Allen "Penny" Demar ]: Go ahead. If I Well, [Tim Ashe ]: I have [Witness Sarah Teachout ]: to have help. [Tim Ashe ]: Yeah. And and, well, just so the employee isn't paying anymore. No. [Member Mari Cordes ]: I'm not talking about I'm talking about acquiring the text. Like, if you do the research and find out that, you know, hospital a, it's one amount, and in hospital c, it's much less. Do you does the patient have any involvement at all? Or how does it get up how does it get It [Tim Ashe ]: it would be a question probably that DHR can answer on behalf of their employees, but there there there may be employees who do that because they care to help advantage the [Member Mari Cordes ]: I thought that's what you asked the employees to do by your metaphor, but maybe I misunderstood. [Tim Ashe ]: No. I was really saying that the employee is sort of inoculated against all of those price variations. It's the plan that's the one that's willing to pay no matter where the individual chooses to go as long as it's a covered service. [Member Mari Cordes ]: Is the plan gonna suggest you go to a rather than b? [Witness Sarah Teachout ]: So traditionally, that's not what we do. I think the system we have now is doing that to patients. Mhmm. We have a system now where the the prices that you pay or that your plan pays for your care really doesn't make a lot of sense, and most patients don't understand. I think we put the tools out there for people who want to make a choice of where they go based on price, knowing that some people have very high deductibles and some people are really price sensitive, but the vast majority of our members don't use those, to make any decision at all about where they're going to seek care. So you're not imagining that? So this would make it so and a chest MRI is the exact same price wherever you are. No. [Vice Chair Francis McFaun ]: I understand that. [Member Mari Cordes ]: I I understand that endpoint. I I try not to understand it from what what the system is expecting of patients. That's what I'm trying to do. [Chair Alyssa Black ]: Just to follow-up on sort of the price transparency. I mean, we have every hospital has a price transparency tool, which roll my eyes out, which I'm probably going to. But what is Blue Cross Shield doing now regarding allowing people I mean, I and [Witness Sarah Teachout ]: I realize how complicated it is, but So we're required by law to have a price transparency tool. Our tool has actually been down. So it's not working right now, but it'll be back up next month. And so it's for members only. You can go in, but it's complicated because, you know, it doesn't use the codes. It just says, I'm gonna have x. So if you if your x is really simple, I'm gonna have a mammogram, and it probably is a good comparison, and it shows you what that would cost at whatever hospital you choose or private facility. So it has all of the ones in there, and you could pick it. If what you're doing is more complicated or you being delivered other services, it's really hard for you to compare it. It doesn't work. It's not we know how many people use it. It's very, very seldom used. [Chair Alyssa Black ]: And I understand that. So, any questions for any other questions for Sarah? Alright, thank you. Thank you. Adam, wanna come on up? And I don't think we've had you in here. So if you wanna introduce yourself to all of us. [Member Allen "Penny" Demar ]: Hello, committee. For the record, Adam Norton, Vermont State Employees Association strategic analyst, as well as the, BSEA staff representative to the Benefits Advisory Committee, which is the contractual and also maybe statutory committee that analyzes the health plan, monitors it, and does policy changes, not cost sharing or plan design stuff so much as much as, you know, different policy stuff. You could look at aggregated payments. You could study reference based pricing. Stuff like that, we take a look at for the state employees with our colleagues at DHR. So I was gonna do a lot of context for the discussion about what was facing the state employee health plan. Fortunately, senator Ash here, deputy auditor, did a fantastic job of demonstrating the crisis the state employee health plan is in. A hundred million dollar swing was referenced. That is correct. Although I think we closed out twenty four in a slightly better position than that graph showed in July of twenty four, but there was a ninety million dollar swing, and it's mostly attributable to increased costs for hospital services. Now there was a little post COVID bump in utilization as well as an increase in the mix of services. Some folks came out of COVID. They weren't able to get care during COVID, and they're they needed more, you know, comprehensive care as a result. But I presented the committee with a slide to demonstrate the issue. And what that shied slide shows is the outpatient cost from twenty, twenty twenty two to twenty twenty three. The slides from Blue Cross Blue Shield. Thank you. And that outpatient five is up eighteen percent while overall utilization is up one. So while the slide does show that there has been some increase in the mix of services, some more high cost services, the leading driver here of the sixteen million dollar increase year over year was just paying more for the same services. As this relates to my other work, half the year I spend with you all, the other half of the year I spend negotiating collective bargaining agreements with the state of Vermont. Health care premium increases like this are not only unsustainable for the taxpayer and our members who pay twenty percent of the premium, but they're nearly impossible to negotiate around. Not only are you trying to negotiate a cost of living adjustment that can meet that expense. And I think last year, we had the biggest COLA since nineteen ninety two. More than half of it for most state employees was eaten up by the fifteen percent increase in premiums. That doesn't leave much else for groceries, property taxes, rent, etcetera. But beyond that, it contributes to the state's inability to pay competitive wages. We have record, vacancies across state government now, particularly in corrections and dental and mental health. But we have over double the vacancies we did eight years ago, almost double now. It's come down a little bit, but it's really hard for the state to be offered the wage increases that they might otherwise be able to offer with such bloated health care costs, that are driving up these premiums. And state employees value and love their health care plan, and we don't want to lose it, which is why VSEA here is is here to humbly ask that you implement a pilot of reference based pricing for us this year. Reference based pricing, and we've been meeting with the folks at Brown University, Montana, Oregon for the past two years. We worked with the GMCB on the study, for the past few months. They did incredible work, by the way. Great people. Reference based pricing is the only thing the only reform we can point to that can have immediate effect and whether you scale it in and what the reference points are. Obviously, there's a lot of nuance to be discussed, but it's the only reform we see out there that's able to contain hospital costs, and we can do it regardless of what happens in Washington. Regardless of what happens, it would be a head model, and we can do it now. So I will leave a lot more testimony to folks, a lot more articulate than me in the technicalities of reference based pricing. But based on VSEA's observations, this is our best shot for controlling hospital costs. And as you've seen with our health plan, we really need it now. [Tim Ashe ]: Yeah. We don't have the luxury of time. Thank you. Questions? [Member Mari Cordes ]: Leslie? Another question might not be able to answer. [Chair Alyssa Black ]: I think I remember hearing that you [Member Mari Cordes ]: were really having a hard time with drugs, and that was really contributing to your I'm wondering if you had any thoughts about that and [Member Allen "Penny" Demar ]: Drug costs. Yeah. We have had may not want to be. If you're not [Member Mari Cordes ]: prepared, that's totally fine. [Member Allen "Penny" Demar ]: Yeah. So we have had trouble with drug costs, and they certainly are an added pressure. I think I'll note that over the last especially with some of the more expensive weight loss drugs coming on, and we've had to, you know, implement checks in the system to ensure, you know, only the best applicants or the referring folks are getting those drugs because there's I'm sorry. [Member Mari Cordes ]: I'm sorry. [Member Allen "Penny" Demar ]: Only the proper folks are getting those drugs because they are very expensive and hardly sustained, and we don't want our system bankrupted by those drugs, which I think we've seen in other public health employee systems who've really some stopped offering them completely because of how expensive they are. We don't wanna do that, but there certainly is cost pressures. But I just looked at the cost pressures. We just had a presentation last Friday. Our drug cost pressures are up seven percent year over year, compared to some of the hospital price pressures we've seen recently, that would be relatively affordable, although it's not. I mean, our hospital prices from twenty two to twenty four, our hospital medical spend went up thirty six percent. So drugs drugs prescription drugs are a huge problem, and, hopefully, the prescription drug affordability board can help get a handle on those. But medical costs are a huge pressure as well than the primary one. [Chair Alyssa Black ]: If if I can ask for a clarification on the chart that you did give us, it's got it has I'm I think I'm confused by your use of the word outpatient facility. Are you talking about outpatient hospital facility, or are you just talking about all outpatient [Member Allen "Penny" Demar ]: All outpatient medical. [Chair Alyssa Black ]: All outpatient medical. [Tim Ashe ]: It wasn't broken down in either way. [Member Allen "Penny" Demar ]: It was inpatient or outpatient. [Chair Alyssa Black ]: Any other questions? Alright. Well, thank you for coming in. [Member Allen "Penny" Demar ]: Thank you so much, Madam Chair and Committee. Thank you. [Vice Chair Francis McFaun ]: And [Chair Alyssa Black ]: likewise, we have from the Vermont NEA and online with us, Mark Cake. Hi, Mark. How are you? [Witness Mark Hage ]: Hi. Good afternoon. My apologies for not being there in person. Another work meeting blocked that possibility, but it's still a pleasure to be here with you today. As you heard, my name is Mark Hage. I'm the director of benefit programs at the Vermont National Education Association. I am also the longest serving trust administrator for the Vermont Education Health Initiative, VHII for short. That's a self insured pool of approximately thirty five thousand covered lives, active and retired school employees, and their eligible dependents. I'm testifying today, to be clear, exclusively in my capacity as a Vermont NEA staffer, but I will be making reference to VHII data to illuminate certain points. So let me begin and my my colleague Adam Norton did a beautiful job sort of setting the table. Vermont and EA strongly endorses the implementation of a reference based pricing methodology benchmark to Medicare rates, RBP for short, to determine fair and sustainable reimbursements for inpatient and outpatient hospital costs or services and to substantially reduce hospital costs and commercial insurance premiums. And there is ample evidence in national research and from the experiences of other states that prove that RBP is fair, it is empirically grounded, and it can indeed dramatically lower costs without compromising access to high quality hospital care. So first, to demystify RBP somewhat, it's a methodology for determining an objective value for hospital services and products using Medicare prices as the reference point. So in the context of RBP, an insurance carrier or a self insured pool like Vehi, for example, or even a state government can set an established rate of reimbursement that represents commonly a multiple of the value that Medicare sets for hospital services. In other words, think of reference based pricing as a Medicare plus system of reimbursement. Now why do we benchmark to Medicare? Medicare is a national system and it's not only the largest healthcare payer in the United States, it's the largest healthcare payer in the world. And we know how Medicare reimbursements are calculated. It's a very transparent system. They are intended to be fair, and they're also adjusted for a host of factors that are outside of hospital's control, wage rates, for example, case mix severity, outlier and transfer cases, teaching intensity, interest expenses, etcetera. And the Medicare Payment Advisory Commission, MEDPAC, is an invaluable source of data and information and a good steward of public money. MedPAC research, in fact, shows that efficient hospitals can break even or even make money on Medicare rates. The Vermont Health Care nine eleven Coalition, which Vermont and AEA is a member of, will be speaking to this point in the future. And finally, the Medicare cost reports provide hospital level data and are the only national public source of hospital costs. For all those reasons, costs. For all those reasons, benchmarking to Medicare makes imminent good sense. In fact, if I were to say to this commission this committee, excuse me, I'd like you to design a reimbursement system for the United States, for our national health care system. If we were to have that conversation, where would we begin to look for guidance about how to reimburse our hospitals at the national level? We begin with Medicare for the reasons that I've cited. Where has RBP been implemented? Well, in one form or another, it's now operable in several states including Montana, Oregon, Colorado, Washington, North Carolina, South Dakota, and Oklahoma. It will be implemented in Nevada in twenty twenty six. It is being studied in other states for possible implementation. And for the reasons that Adam has commented on, quite simply, hospital prices are the main driver of health care costs and commercial insurance premiums. And as alluded to in some of the back and forth with Adam, the questions certainly prescription costs are a decisive factor, but the where the rubber is hitting the road the hardest for us right now with respect to controlling costs and making health care affordable is with hospital prices. So let me put this in a VeHi context for you and, again, this is data that's in the public record. My colleague at VeHi, Bobby Joe Sauls and I have spoken to this at other committees. Hospital cost for Vehi presently account for fifty five percent of our total spent. The recent Green Mountain Care Board RBP analysis shows that VHII and remember, our cost impact every school district, every school employee, and thus every taxpayer. That Green Mountain Care Board RBP analysis showed us just looking at VHII's numbers between twenty eighteen when the study began through the first three quarters of twenty twenty three, data was not available for that fourth quarter of that year. We were paying on average to our hospitals three hundred and one percent of what Medicare reimburses, more than three times what Medicare reimburses. In twenty twenty two, that number was three hundred and sixteen percent. And for the first three quarters of twenty twenty three, three hundred and twenty six percent. For the last four years, twenty twenty through twenty twenty three or the first three quarters of twenty twenty three, VEI was paying at or above three hundred percent of Medicare rates. If we had been reimbursing double what Medicare reimburses, two hundred percent, the savings in twenty twenty two and if we had that fourth quarter data from twenty twenty three, those two years combined would yield savings in the neighborhood of a hundred million dollars. Again, that's just VHII specific data. Over the entire period of the Green Mountain Care Board analysis, the savings for both pools, VHII and the state of Vermont was four hundred million dollars if we had reimbursed Medicare at two hundred percent. Excuse me. If we had reimbursed our hospitals, benchmarked to two hundred percent of Medicare rates, savings was approximately four hundred million dollars. VHai's portion of that was two hundred and thirty million. Now, again, I'm talking about paying double what Medicare pays and still seeing very significant savings. So where we have cost studies of reference based pricing, where we've got really hard dollar figures based on independent analyses, there are two states in particular that now stand out, and that's Montana and Oregon. An independent study of Montana's reference based pricing initiative and Montana applied this methodology to its state employee plan only, thirty one thousand covered lives comparable to the state of of Vermont and certainly to VHI. For those thirty one thousand covered lives apologies. For those thirty one thousand covered lives from f y twenty seventeen to f y twenty nineteen, the state of Montana lowered its health care costs by approximately forty eight million dollars. I wanna stress that word lower. Right? We often talk about bending the proverbial cost curve in health care. Montana lowered its cost by approximately forty eight million dollars over those two years. Between FY seventeen and FY twenty four, there was no increase in state employee premiums. And its healthcare reserves were substantially enhanced. They were perilously low before reference based pricing went into effect. They were so flush in fact that the state of Montana used monies from that health care reserve to pay for programs outside of health care that the state was responsible for. And Montana implemented a range of reference based pricing. In other words, for inpatient services, there was a range of two hundred and twenty to two hundred and twenty five percent of Medicare for outpatient, two thirty to two hundred and fifty percent of Medicare rates. When we look at Oregon where the program covers approximately three hundred thousand public sector workers, school employees, state employees and municipal employees and their families. That program was implemented via statute. Statute passed in twenty seventeen. It went into effect in twenty nineteen for twenty four of Oregon's sixty two hospitals. In network hospitals were reimbursed at two hundred percent of Medicare rates. Out of network hospitals reimbursed at a hundred and eighty five percent of Medicare rates. An independent actuarial analysis showed that in twenty twenty, the savings to the Oregon Health Authority for the public sector employees, dollars fifty nine million. In twenty twenty one, a hundred and thirteen million dollars in savings. I've continued to research Oregon because I believe they're on the cutting edge of reference based pricing in many respects. And when I dug deeper into some of the data, what I discovered is that in twenty seventeen, ten of twenty two of the hospitals that would ultimately be impacted by this reference based pricing cap were at or above three hundred percent of Medicare rates with respect to their reimbursements from the commercial market. Again, at or above three hundred percent reimbursements benchmarked to Medicare. Today, according to the Oregon Health Authority, those twenty four hospitals impacted by the statute in twenty seventeen, roughly paying a hundred and sixty five percent benchmark to Medicare for hospital reimbursements for inpatient and a hundred and ninety percent roughly for outpatient service. The hospitals in Oregon have clearly shown the ability to be much more efficient in their operations, to be able to provide high quality care, all of them still in network, none of them have closed, and that's true for Montana as well, by the way. To go from hospitals that were at or above three hundred percent to be at one sixty five for inpatient, one ninety for outpatient, that shows significant change on the part of the hospitals to be more affordable and more efficient and to save the public sector in that state substantial amount of money. I also wanna stress that there is no evidence that RBP capped hospitals in Oregon raised prices for the commercial beneficiaries to compensate for lower reimbursements from the public sector. And as as we are not seeing evidence of a cost shift to the commercial market outside of the public sector because of the lower reimbursements that Oregon passed via statute for its state employees, public school employees, and municipal employees. And again, I wanna stress no hospital departures from insurance network, no hospital closures, and those fax holds for Montana and other states as well. More recently, I have learned that South Dakota and Oklahoma have instituted reference based pricing initiatives. There is no hard cost data yet from those states. However, as reported in health affairs recently, they have said they're seeing significant savings for their public sector plans, their public sector employees, and state taxpayers. There's no evidence as is true for Oregon, Montana, and other places that access to care has been compromised. Broad provider participation in the medical networks continues both in Oklahoma and in South Carolina. South Carolina officials also noted that providers liked working with the public sector because it's a prop payer and it provides generous coverage. And officials in both states said that because public sector workers, school teachers and other public servants were being covered by these RBP arrangements, that the providers in the states have been generally more sympathetic about the need to lower rates for these employees and their families. With respect to the State of Washington, again, I don't have hard numbers for you. They have implemented reference based pricing for plans on their state exchange at a hundred and sixty percent of Medicare and they have particular exemptions that also apply to hospitals as is the case in Oregon. The Washington office of the insurance commissioner recommended that reference based pricing be applied now to all public sector plans in the commercial market following initiatives in Oregon and Montana and believes if that were the case that medical spending could drop anywhere from three to nineteen percent. I wanna stress that those of us who support reference based pricing, we want our hospitals to be fairly and sustainably reimbursed. No one is served, no one, by not reimbursing fairly. But those reimbursements need to be rational, and they need to be benchmarked to rates that correlate reimbursements with actual cost. What's that breakeven point? What do our hospitals need at any given point in time to meet their operational cost and provide high quality care? And reference based pricing is a way for us to do that with a system that is well established, transparent, and whose rates are intended to be fair. So I hope this testimony has been helpful. I hope it's helped shed some light on why we believe reference based pricing is essential to lowering costs for the commercial insurance market and at the same time being fair to hospitals. And I would close by urging the committee to invite and take testimony from experts on reference based pricing, including from knowledgeable sources in Montana and Oregon and from national analysts. And I'd be happy to assist you in facilitating introductions to these individuals so that you can hear firsthand about how and why they moved to reference based pricing and why it's been so successful in their respective states. Thank you. [Chair Alyssa Black ]: Thank you, Mark. I think Brian has a question. [Member Brian Cina ]: Yeah. I don't know if anyone else asked this earlier today because I have brain fog right now. But if they did, you can give your answer. And if they didn't, then I'm glad I thought of it now, which is in Montana and Oregon, did it impact the cost for other plans when they implemented reference based pricing for specific plan? For for, like, for one class of plans? [Witness Mark Hage ]: I've asked that question both of experts in Montana and also the Oregon Health Authority. There is no evidence in my conversations with them, and I haven't found it in any written research that shows that by virtue of setting reference based pricing for the public sector, for example, as a first step, that that led to a cost shift, higher cost for the commercial insurance products for those employers or employees who were not part of the public sector. We've not seen that kind of cost shift as a compensation measure by hospitals. In fact, when I asked that question in in Oregon, and they said we haven't we aren't seeing that. We don't have evidence of that. I said, well, what do you think explains it? And they said, well, we're paying double what Medicare pays. And the research from the, as I said, from the Medicare payment advisory commission shows that hospitals can break even and even make money on Medicare rates, not Medicare plus, just Medicare rates. So an RBP formula that is Medicare plus should be sufficient to meet those costs and, again, to encourage greater efficiencies by the hospitals subject to them. And to be clear, while I certainly believe that we should see RBP in the public sector, I also believe it's essential for the commercial insurance market. I see no compelling reason why we wouldn't move to it in the commercial insurance sector as well. And I anticipate that the Green Mountain Care Board, is going to be having that conversation when hospital budgets come around again. [Chair Alyssa Black ]: Brian? [Member Brian Cina ]: Yeah. I think that yeah. I think yeah. The follow-up, I think you sort of mostly just answered it, which because I was gonna ask why not just do it for everyone at once if it works. Why roll it out slowly? I know that there's people might argue that, you know, in any any change to a big system, you wanna move slow. But, federally, we're seeing such massive changes to systems right now, throwing everything into chaos that why not join in and just jump to reference based pricing for everyone? Like, is there any reason why we wouldn't wanna just do that? [Witness Mark Hage ]: I don't see any reason why as I said it it shouldn't be applied to the commercial market. The question of timing, how that is done, what the Green Mountain Care Board needs data wise and procedurally to move in that direction. Those are questions they can answer better than myself. But what's interesting about the other states is that they saw a compelling need and Adam spoke to this when he referenced the situation in his pool and I will say the same for for our pool. They saw a compelling need to strengthen and enhance the public sector pools and also I think to get their feet on the ground with RBP. So again, I think the public sector can be a very important starting point in this effort, But there's no reason why, again, to your question that it can't reasonably soon I think be applied to the commercial market as well. But we have really good examples of where it's working in the public sector in several other states. [Chair Alyssa Black ]: I think I have two questions that sort of build on that. You know, first of all, the how do I justify how do we around this this committee justify extending reference based pricing to teachers, state employees when we're leaving the rest of the commercial market decline, particularly the individual market with the threat of, the advanced premium tax credit going away. How do we justify saving these two plans, which, frankly, are some of the, I'm gonna use the word rich, but, you know, more comprehensive plans of other insureds other insured people within the state of Vermont. How do we justify that? [Witness Mark Hage ]: I think what I'd say is, again, if we can move reasonably quickly and efficiently to the entire commercial insurance market, that should be on the table for discussion. With respect to VHII, the state employees plan, and certainly municipal's employees could also be part of this conversation and should be. We're talking about health care plans that impact every single Vermonter and every single taxpayer. So bringing relief to those plans immediately and laying a foundation for moving to RBP for the rest of the commercial market has a direct financial impact on all Vermonters. And, again, it gives us an opportunity to establish a strong foundation for expanding RBP to the rest of the commercial market as quickly as we can do so. [Chair Alyssa Black ]: And I think my follow-up to that is, you know, as as much evidence, which I mean, it's very clear. If you move to reference based pricing, you're going to save money. That's it's just a numbers thing. And I know we've heard evidence that it hasn't affected, you know, hospitals necessarily, that they have found greater efficiencies. But I'm wondering if Montana, Oregon, Washington, all the other states that have been named, I'm wondering if they were looking at almost three fourths of their hospitals in imminent threat of closure in the next couple years, because that's what we're looking at. And so, you know, we have to weigh, yes, is it is it better for ratepayers? Will it save money on the system? But still, what do I tell that hospital that's already operating at a negative three percent margin? Sorry. Be more efficient. I mean, what or your community loses their hospital. [Witness Mark Hage ]: Well, certainly, we don't wanna see any community lose its hospital. And the Act one sixty seven report was a wake up call that within the next five years, I believe, most of our hospitals are gonna be facing some serious financial pressures. But the report was also clear that if certain reform measures are implemented, those hospitals can operate sustainably. And I believe the reference based pricing will allow them to do that. It will not put them in greater financial harm if we undertake this effort in good faith, if we have good data and we will have it, and if hospitals, certain large hospitals in particular, begin to show much greater efficiency, more sensitivity to moving care out of emergency rooms and hospital beds and back into the community, strengthening primary care, mental health care. It's a number of measures that need to be taken in a different in addition to certain kinds of rate setting. But I believe that reference based pricing, even if we begin with the public sector first, is not going to imperil hospitals. I think it's going to drive a particular kind of conversation about what kind of hospital care makes the most sense for Vermont. What is most cost effective? What's best for quality of care? How do we better integrate hospital and primary care services broadly defined. I see this all as sort of a of a piece. I don't believe reference based pricing, as I've seen in other states, has imperiled the hospital system. Quite the opposite is the case, and they all began with a public sector approach. And if there's a way to do it with a commercial market, we can begin to move in a rational and expedited way toward that. We certainly support that. But we're also looking right now, how do we bring real financial relief to taxpayers? And reference based pricing most immediately with health care costs is a way to do that. [Chair Alyssa Black ]: Thank you, Mark. Thanks for joining us. Thank you. Alright. I think we're gonna finish just a reminder that we will be back here fifteen minutes after the floor. Actually, can you say ten minutes? Which means fifteen. Wow. But say ten minutes.

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