House Health Care committee debates reference-based pricing, hospital budget changes in S.126

On May 6 the House Health Care Committee reviewed draft 1.3 of S.126, a bill that would authorize the Green Mountain Care Board to set reference-based prices for Vermont hospitals and to incorporate those prices into the hospital budget review process.

The committee discussion focused on four linked questions: how to define reference-based pricing and its benchmarks; whether and how to prevent hospitals and other health care professionals from balance-billing patients; which payers and services should be covered (and whether Medicare and Medicaid must be carved out); and how the board and agencies should monitor that lower hospital prices translate into lower insurance premiums.

Harvey, legislative counsel at the Office of Legislative Council, summarized the bill’s opening language: "The purpose of this act is to... achieve transformation of and directorial changes to Vermont's health care system," and walked the committee through editing choices in draft 1.3. The draft moves system goals such as improved outcomes, population health, and investments in primary care higher in the bill’s purpose language.

On reference-based pricing, committee staff proposed that the Green Mountain Care Board set maximum amounts that hospitals "shall accept as payment in full" for items and services. "The board shall implement reference based pricing in a manner that does not allow health care professionals to charge or collect from patients or health insurers any amount in excess of the reference based amount established by the board," Harvey said while presenting the draft language.

Stakeholders and committee members debated how to set benchmarks. The draft text would reference a percentage of the Medicare reimbursement rate while allowing the board to use other benchmarks where Medicare is not appropriate. Diane (representing the Green Mountain Care Board) told the committee the board "did not support the recommendation for methodologies because Medicare methodologies differ across types of hospitals, which could create unanticipated confusion and unnecessarily complicate the pricing methodology."

Health-care providers’ groups pressed for clearer implementation rules for non-hospital providers and for insurers. Jessa Barnard of the Vermont Medical Society said the society favored language that makes hospitals' maximum amounts explicit so "everybody's paying would pay the same amount" and urged caution about using a single methodology for non-hospital providers.

Agency and payer representatives asked the committee to clarify the bill’s scope. Eli, representing the Agency of Human Services, said, "We would greatly prefer to explicitly exclude Medicaid from, from this section," noting that Medicaid is already treated separately under existing definitions in the Green Mountain Care Board chapter. Committee members discussed carving out Medicare as well unless a federal waiver permitted inclusion.

The draft sets an implementation timeline for hospital-focused reference-based pricing: the board would begin implementing the approach "as soon as practicable but not later than hospital fiscal year 2027," and the board would review reference-based prices for each hospital annually as part of the hospital budget review process. Committee staff also proposed that the board post an annual report on the alignment between price decreases and premium decreases and identify factors that would require terminating or modifying reference-based pricing, including measurable reductions in access or quality.

Members debated whether the reference-based model should set maximum amounts hospitals may accept, while a different construct—minimum amounts insurers must pay—would apply to non-hospital providers to avoid underpaying primary care. Mary Kate Baldwin of state primary care noted federally required minimum payment levels for federally qualified health centers. Some committee members suggested separating the hospital construct (maximum hospital charges) from non-hospital payment constructs (minimum insurer payments to prioritize access).

Beyond payment rules, the draft creates a statewide health care delivery strategic plan and two advisory bodies, including a Comprehensive Primary Health Care Steering Committee. The plan would be developed by the Agency of Human Services with stakeholders and the steering committee and would: establish goals and benchmarks; propose phased implementation timelines and milestones; identify resources and infrastructure needed to meet targets; and incorporate an evaluation framework. The draft directs the agency to present an initial plan to the legislature (the draft references an on-or-before January 15 deadline) and to provide updated plans every two years beginning December 1, 2028.

Committee members spent significant time on metrics and accountability language. Some said the bill should require specific domains and quality metrics, while others argued metrics should be developed by the steering committee to allow flexibility as evidence and methods change. "What we measure is what matters," said one member urging clearer performance domains for quality, access and cost; other members emphasized not embedding specific, possibly short-lived measures in statute and relying instead on the planned advisory bodies.

No formal motions or votes were recorded in the markup excerpt. Committee staff said they planned additional edits to reconcile hospital-versus-non-hospital language, carve-outs for federal programs, and the statutory cross-references before next steps.

The committee also discussed procedural details: definitions were moved to make them apply across sections, confidentiality and contract-review provisions for health care contracts were adjusted to require unredacted contracts to be provided to regulators on request, and the Green Mountain Care Board’s authority to "recommend" corrective action for hospital networks was clarified while removing language that would give the board direct enforcement authority.

Lawmakers signaled they expect more stakeholder work on benchmarks, methodologies, and how to ensure reduced hospital revenue translates into premium relief for consumers. Several members noted that further development of the strategic plan and committee reports will guide how reference-based pricing and other reforms would be implemented.

Looking ahead, committee staff scheduled a short break and said the bill would be revised again to reflect the committee’s choices on scope, benchmarks, carve-outs and reporting requirements before further deliberation.