Health Care Experiment Aims for Healthier Patients, Lower Costs

Vermont, with a population more rural and less diverse than the country as a whole, is embarking on an experiment that could transform the delivery of health care nationwide. Traditionally, doctors and hospitals are paid for each procedure, treatment or test they provide. But critics say this “fee for service” system drives up costs and harms patients by pushing providers to do as much as possible, regardless of whether it benefits patients. Under Vermont’s plan, to be phased in through 2022, health plans would pay doctors and hospitals based on how well they care for their patients and contain costs, rather than on the volume of services they provide. Some health care plans, public and private, have been experimenting with “pay for performance” systems for more than a decade. But Vermont’s experiment is the most ambitious, aiming to cover 70 percent of the state’s residents (excluding those who are in out-of-state employer-sponsored plans), whether they are beneficiaries of Medicare, Medicaid or commercial health insurance.