Expert Urges Payment Reform, Stronger Oversight to Shift Care Toward Primary and Preventive Services

Elena Berube, a health services researcher at Dartmouth and former director of health systems finance and policy at the Green Mountain Care Board, told the Senate Health and Welfare committee that payment redesign and stronger market oversight are key tools to improve access to primary care and rein in health-care spending.

"The U.S. health care system is rife with market failure," Berube said, adding that misaligned incentives, poor information and limited competition drive wasteful spending and unequal access. She outlined how states and federal programs use a mix of payment approaches — capacity-based, activity-based (fee-for-service) and population-based (capitated) payments — and said Vermont needs monitoring and a suite of tools to manage the risks and benefits of each.

Berube framed the problem as a market-design issue: people and providers often face incentives that do not align with population health goals. She said that information asymmetry (patients having less clinical information than providers), emotional decision-making and conflicts of interest can lead to overuse of services, higher prices and greater administrative costs. For rural areas in particular, she said, high start-up and operating costs reduce competition and make it harder to sustain primary care services.

To address those problems, she reviewed existing remedies used elsewhere: the Affordable Care Act's insurance-market rules, federal grants (for example HRSA support for federally qualified health centers), direct government provision (for example the Veterans Health Administration), and state-level planning such as certificate-of-need processes. Berube cited state examples of market oversight: Connecticut, California, Massachusetts and Oregon have review processes tied to consolidation; Rhode Island has affordability standards that cap hospital spending; and Maryland combines capacity-based and activity-based elements in its hospital payment model.

Berube also described how payment models change provider incentives. In fee-for-service systems, she said, "revenue equals price times volume," which can encourage higher volumes. She cited a CMS actuarial finding she said has been replicated in research: a 27% price reduction for certain procedures was associated with a 17% volume increase in the period she referenced. By contrast, capitated payments (she cited Kaiser and Medicare Advantage as examples) give intermediaries a fixed budget and therefore shift emphasis to managing costs and redesigning care delivery, though they carry risks if oversight and quality measures are weak.

She recommended that Vermont pair any payment changes with careful monitoring of access and outcomes. "Profit is really revenue minus cost," Berube said, noting that organizations can respond to fixed payments either by redesigning care to lower costs or, if not properly overseen, by restricting needed services. She urged attention to measurement: the state needs data and performance measures that show whether primary and preventive care are increasing and whether patients are still getting necessary care.

Committee members asked for slower pacing of the presentation and follow-up materials. A chair member asked Berube to submit written recommendations to committee staff (referenced in the meeting as Kiki) for broader committee review; Berube agreed to send suggested policy options and evidence summaries. No formal votes or committee actions occurred during the presentation.

The presentation focused on tradeoffs between access, cost control and provider incentives rather than on a single legislative proposal. Berube said there is no "silver bullet" and recommended a strong state agency capable of evaluation, planning and enforcement to implement payment reform and market oversight in concert.