The Vermont Green Mountain Care Board’s (GMCB) proposal to cap hospital reimbursements at 200% of Medicare rates targets only the Vermont State Employees’ Health Benefit Plan (VSEA) and the Vermont Education Health Initiative (VEHI). These plans, covering about 59,000 beneficiaries, represent a fraction of Vermont’s population, while private sector insurance plans remain untouched. This selective price cap forces hospitals to bear the financial burden, creating a two-tier system that risks destabilizing Vermont’s healthcare infrastructure.
Selective Caps: A Two-Tier System
The proposed cap applies exclusively to VSEA and VEHI. Hospitals would face lower reimbursements for services provided to these plans while continuing to negotiate higher rates with private insurers. This creates a two-tier pricing system that hits hospitals from multiple financial angles. First, Medicare and Medicaid already reimburse below the actual cost of care, leaving hospitals reliant on private insurance to remain solvent. Second, the cap removes one of their most critical revenue streams by limiting payments from state health plans.
This selective approach incentivizes hospitals to prioritize patients with private insurance who can pay higher rates, leaving state plan beneficiaries with potentially reduced access. It also increases pressure on private insurers, who may face demands for higher reimbursement rates to make up the shortfall, driving up premiums for Vermont residents outside these plans.
The Real Cost to Hospitals
Hospitals are already facing significant financial pressures, and this proposal exacerbates those challenges. Critical access hospitals, which serve rural and underserved areas, are at the highest risk of closure due to their heavy reliance on public payer reimbursements. Larger hospitals may absorb these losses in the short term, but they will likely need to cut services or delay investments in infrastructure and technology to remain financially viable.
Patients are also likely to feel the strain. Hospitals may reduce or eliminate less profitable services, such as mental health care, obstetrics, or emergency departments. Administrative complexity will also rise as hospitals juggle capped rates for state plans and higher rates for private insurers, increasing costs and inefficiencies.
A Fairer Alternative: Workforce Reductions
If Vermont aims to save $79 million annually, reducing the state workforce offers a more balanced solution. The state currently employs about 8,000 public workers, with a ratio of 589.4 public employees per 10,000 residents—far above the national average of 500. By eliminating 900 positions, Vermont could achieve the same savings while bringing its public employee ratio down to 575.4 per 10,000 residents.
Even after this reduction, Vermont would still exceed the national average, highlighting its over-leveraged public sector. This approach avoids destabilizing hospitals and forces the state to address inefficiencies in its workforce while preserving essential healthcare services.
Federal Failures and State Band-Aids
At its core, Vermont’s healthcare cost crisis stems from systemic failures at the federal level. Medicare and Medicaid underpayments leave hospitals operating at a deficit, forcing them to shift costs to private insurers. The GMCB’s price cap plan is a Band-Aid that redistributes this burden onto hospitals without addressing the root causes.
Rather than imposing selective caps, Vermont should advocate for federal reforms that increase Medicare and Medicaid reimbursements to cover the actual cost of care. Investing in value-based care models that reward efficiency and outcomes, rather than blunt cost-cutting measures, would offer a more sustainable solution.
The Multiple Financial Hits to Hospitals
Hospitals are now facing a perfect storm of financial hits. Medicare and Medicaid underpayments already create deficits. The added strain of capped reimbursements from VSEA and VEHI removes one of their last remaining revenue buffers. These financial pressures leave hospitals with limited options: cut costs, raise prices for private insurers, or both.
Patients with private insurance may end up paying higher premiums, while state plan beneficiaries face reduced access and service quality. All of this is being done to placate a powerful voter block of public employees and teachers at the expense of Vermont’s healthcare infrastructure.
Conclusion
The GMCB’s proposal is a shortsighted attempt to reduce costs for state health plans while creating inequities and destabilizing hospitals. By targeting only VSEA and VEHI, the policy shifts financial burdens without addressing systemic inefficiencies.
Reducing Vermont’s over-leveraged public workforce offers a more balanced alternative that saves the same $79 million without threatening hospital sustainability. At the same time, Vermont must push for federal Medicare and Medicaid reforms to tackle the root causes of its healthcare cost crisis. Selective price caps may offer temporary relief for a privileged few, but they risk long-term harm to the entire healthcare system.
Dave Soulia | FYIVT
You can find FYIVT on YouTube | X(Twitter) | Facebook | Parler (@fyivt) | Gab | Instagram
#fyivt #HealthcareCrisis #VermontPolicy #HospitalFunding
Support Us for as Little as $5 – Get In The Fight!!
Make a Big Impact with $25/month—Become a Premium Supporter!
Join the Top Tier of Supporters with $50/month—Become a SUPER Supporter!
Leave a Reply