RBP is an approach to setting hospital prices that sets a value for inpatient and outpatient services using Medicare rates as a reference point. VSEA is proposing that we benchmark outpatient care at 200 percent of the Medicare cost for those services, and slightly higher for inpatient services. For reference, in 2022, UVMMC was charging 417 percent of Medicare rates for Outpatient services.
While your healthcare plans will cover highly inflated hospital costs, as a result, your health insurance premiums are rising substantially each year. In January 2025, health insurance premiums rose by 15 percent. This increase is largely driven by two key factors– escalating hospital prices and rising prescription costs.
Why do we need Referenced Based Pricing, and how will it benefit Vermont state employees?
Hospital prices are the main culprit behind our unsustainable health insurance premiums, which have already increased by over 52% from 2022 to 2025. Most health care costs (and premium spikes) are generated by hospital services. According to RAND, inpatient and outpatient charges combined at UVMMC in 2022 averaged 317 percent of Medicare rates. That means we reimbursed UVMMC on average, more than 3 times what Medicare did in 2022.
Outpatient charges in 2022 at UVMMC averaged 417 percent relative to Medicare rates, meaning their prices are among the highest in the nation. Additionally, the Act 167 Report recommended that RBP enforces a benchmark of 200 percent or less of Medicare rates for certain hospitals in 2025.
Lower hospital prices are essential for reducing premiums and preserving health benefits. We need to set a realistic standard for what hospitals can charge. This will help insurance companies from spending more than they can handle to cover these costs, which will prevent premiums from increasing year after year, make healthcare more accessible, and save state employees money. The most dominant hospitals, like UVMMC, will fight this change with high-priced lobbyists, spreading fear and misinformation. But we know that RBP works– as seen in Montana, Colorado, among other states– and we can’t afford to wait any longer.
Why use Medicare rates as a reference point for hospital charges?
Medicare is the largest healthcare payer in the U.S. We know how its prices are calculated, and they are intended to be fair. The Medicare Cost Reports required by the federal government are a trusted public source of hospital-level cost data.
What kind of savings could RBP produce if implemented in Vermont for state employees and public schools at 200 percent (or double the rate) of Medicare reimbursements?
A 2024 Green Mountain Care Board study estimated that if Vermont reimbursed hospitals at 200% of Medicare rates between 2018 and 2023, the state could have saved $400 million, including $79 million in 2022 alone. VEHI, which reimburses hospitals at over three times Medicare rates, would see similar savings. RBP could reduce financial pressures on VEHI and VSEA, lowering the need for tax increases or reduced benefits.
Have other states instituted RBP for public-sector workers?
Oregon instituted RBP in 2019 for approximately 300,000 public school, state, and municipal employees. It capped in-network payments at 200% of Medicare rates and out-of-network payments at 185%. The state saved $107.5 million over 27 months according to a study published in Health Affairs. The 24 Oregon hospitals affected remained in-network and access to care has not been compromised.
A more recent study found that “Implementing a payment cap at 200% of Medicare rates could have saved state employee health plans $7.1 billion nationwide in 2022.”
In Montana, reference-based pricing for 31,000 state employees and dependents was instituted in 2017. State expenditures then reduced an estimated $47.8 million for inpatient and outpatient care within the two years that followed. No hospitals closed, and neither the state nor its public employees saw an increase in their premium contributions from 2017-24. More recently, Montana issued a contract to Blue Cross Blue Shield to permit them to “customize alternative payment arrangements,” provided reimbursements were no more than 200% of Medicare rates in the first year, with a reimbursement target of 180% by year three of the agreement.
Other states – Colorado, Washington, North Carolina, and Nevada – have implemented or set in motion some form of RBP for hospital charges.