As recently reported by Modern Healthcare and other major healthcare news outlets, the Obama administration has granted tentative approval for Vermont to establish an all-payer reimbursement system. If granted final approval, the Vermont All Payer Accountable Care Organization Model (Model) would be effective for five years from January 1, 2017 to December 31, 2022. The Model would be the first in the nation to cover all healthcare providers. By way of contrast, Maryland’s well-known all-payer system only covers hospitals.

The Model is based on Medicare accountable care organizations. If approved, all healthcare providers in Vermont would be paid global rates based upon quality and total cost of care expenditures, rather than the traditional fee-for-service payment methodology. The Model and its quality-based payment methodology would create a path for providers to get to Merit-based Incentive Payments or Alternative Payment Model payments being mandated under the Medicare Access and CHIP Reauthorization Act, known as MACRA. Finally, the Model would allow Vermont providers to participate in the Medicare Shared Savings Program ACO model, Next Generation ACOs, or full capitation under the prepaid model.

In its development of the Model, the state considered a single-payer model similar to the one proposed by Senator Bernie Sanders. However, the single-payer model was abandoned after estimates found that it would cost Vermont an additional $2 billion in its first year.

Finally, before the Model becomes law, there will be a public process in Vermont. The draft Model agreement as tentatively approved by the Obama administration remains under final legal review by Vermont and CMS. If the Model survives the final legal review process, the final Model agreement will need to be signed by the Vermont governor and health administrators.