Primary Care Payment Reform (S.197) - Overview & Analysis

The bill, S.197, reformats how primary care is paid for in Vermont by strengthening and modernizing the Blueprint for Health payment system, setting primary care spending targets, and directing a series of studies and reports to support a more sustainable, community-based primary care system, with major topics including primary care payment reform, insurer participation and transparency, primary care spending targets, workforce and site-of-care issues, pharmaceutical coverage notice, and potential regional universal primary care.

The Details:

• Clarifies key definitions in the Blueprint for Health statute
  The bill refines the definitions of “health insurance plan” and “health insurer” in the Blueprint for Health law to ensure that the payment and participation requirements clearly apply to major medical plans and to entities that issue, renew, or administer health benefit plans in Vermont, including certain third-party administrators.

• Strengthens health insurer participation and data reporting for the Blueprint
  Health insurers must continue to participate in the Blueprint for Health as a condition of doing business in Vermont and must submit, at least quarterly, all information the Blueprint Director determines necessary to analyze total cost of care and to implement sustainable payment models that address capacity, volume, quality, and outcomes.

• Requires per-person, per-month payments to primary care practices with payer parity by 2027
  The Blueprint’s payment reform methodologies must include per-person, per-month (PPPM) payments from each health insurer and Medicaid to medical homes and primary care providers for attributed patients and for shared Blueprint costs, such as community health teams. These PPPM payments must be in addition to typical fee-for-service or other payments and, starting in 2027, health insurer payments must be at least equal to Medicaid’s PPPM amounts.

• Authorizes ongoing adjustment of primary care payment methodologies
  The Blueprint Director, with recommendations from the Blueprint Executive Committee, may recommend changes to PPPM amounts and methodologies to the Secretary of Human Services, including enhanced payments for medical home practices (such as primary care naturopathic practices), contributions to community health teams, and any payment structures required by federal regulators for Medicaid or Medicare participation, with a focus on maintaining parity across payers and adequately supporting practices to meet quality or participation standards.

• Aligns insurer payments with statewide primary care payment models and federal requirements
  Health insurers must modify their payment methodologies and amounts to support the Blueprint and related payment models, including meeting any Centers for Medicare and Medicaid Services (CMS) requirements tied to federal participation. If CMS does not allow Medicare to participate financially, insurers are not required to cover Medicare-related costs under these models.

• Updates appeal rights for insurers regarding required payments
  A health insurer may appeal decisions requiring particular payment methodologies or amounts to the Secretary of Human Services (or designee), who must hold a hearing under the state’s administrative procedures. Insurers may then appeal the Secretary’s decision to Washington County Superior Court within 30 days.

• Establishes primary care spending targets in statute
  The Agency of Human Services (AHS) must set a target level for per-person, per-month spending on primary care services for Vermont residents and develop a schedule to increase that target over time. Targets can vary by payer based on factors such as age and health status. The increased spending is to be directed to the PPPM primary care payments required under the Blueprint.

• Directs a 2027 report on transitioning PPPM payments to cover routine primary care
  By January 1, 2027, the Blueprint Director, in consultation with the Blueprint Executive Committee and the Vermont Steering Committee for Comprehensive Primary Health Care, must report to the legislature on how to transition Blueprint PPPM payments so they include payment for routine primary care needs of attributed patients covered by participating plans. The report must define routine primary care services, address methodology differences by practice type, recommend risk adjustment and attribution methods, explain how capacity, volume, quality, and outcomes will be balanced, propose mechanisms for accurate and timely payments, recommend participation and quality requirements, analyze inclusion of patient cost-sharing (including implications for high-deductible health plans with HSAs), propose ways to incorporate primary care spending targets, and include an operational plan and any needed legislation for implementation by January 1, 2028.

• Requires a 2027 baseline analysis of primary care spending
  By January 1, 2027, Agency of Human Services (AHS), in consultation with the Green Mountain Care Board (GMCB), must report baseline per-person, per-month primary care spending for Vermont residents overall and separately for each health insurer, third-party administrator, Medicaid, and Medicare, using a standardized definition of primary care services (from the AHEAD Model or NESCSO).

• Requires a 2028 report on primary care spending targets and implementation needs
  By January 1, 2028, AHS must report to the House Health Care and Senate Health and Welfare Committees on the specific primary care spending targets and the schedule for increasing them, any payer-specific adjustments, and any further legislation needed to implement and enforce those targets and the new statutory section on primary care spending.

• Updates the Vermont Clinician Landscape and site-neutral reimbursement analysis
  By January 1, 2027, the Green Mountain Care Board must provide an updated Vermont Clinician Landscape Study, reflecting current conditions for Vermont clinicians, and an updated report on site‑neutral reimbursements, including current reimbursement differences by practice setting and ownership and any significant efforts since 2017 to move toward site-neutral payment.

• Studies accelerated transition of care from hospitals to community settings
  By January 15, 2027, Agency of Human Services (AHS), must report recommendations for shifting appropriate care from hospital-based settings to community-based primary care, including strategies to reduce use of inpatient hospital settings for primary care services after surgery or acute care when community-based primary care would be as or more effective and less costly, and opportunities to use community health teams for care transitions.

• Explores a regional universal primary care program with other states
  The Office of the State Treasurer, in consultation with AHS, must work with other northeastern states to explore creating a regional universal primary care program for all residents of participating states and, by January 15, 2027, report to the legislature on outreach efforts, other states’ interest, legal or regulatory obstacles, and recommended next steps.

• Repeals the planned sunset of the medical students primary care statute
  The bill removes the previously scheduled July 1, 2027 repeal (sunset) of 18 V.S.A. § 33, which relates to medical students and primary care, thereby keeping that statute in effect unless changed by future legislation.

• Requires advance notice to patients when prescription drugs are removed from formularies
  Health insurers must continue to notify covered individuals at least annually of pharmaceutical coverage changes and provide access to their preferred drug lists. In addition, at least 60 days before removing a prescription drug from a formulary (whether managed by the insurer or its pharmacy benefit manager), an insurer must notify all covered individuals who filled that prescription in the previous 12 months that coverage will end and specify the end date.

Analysis:

S.197 represents a significant step in Vermont’s ongoing attempt to strengthen primary care by reinvigorating the Blueprint for Health while keeping overall system costs in check. By moving toward more robust per-person, per-month payments and establishing explicit primary care spending targets, the bill signals a deliberate shift away from relying solely on fee-for-service payment toward a blended or alternative model that better supports prevention, coordination, and access. At the same time, it pairs these payment changes with detailed planning requirements, updated workforce and payment data, and an exploration of regional solutions, indicating that the Legislature is aware of the complexity of transforming primary care financing.

Strong primary care is associated with better health outcomes, fewer avoidable hospitalizations, and better management of chronic conditions, all of which underpin economic stability and security for Vermonters. 

On transparency and accountability, S.197 has mixed but generally positive implications. The requirements for more frequent insurer data submissions, the setting of clear spending targets, and the multiple public reports (on baseline spending, target levels, payment methodology design, clinician supply, and site-neutrality) all promote a more data-driven and open approach to health policy. The enhanced notice when a drug is removed from a formulary also improves transparency at the patient level. However, real accountability for meeting spending targets and implementing new models remains contingent on future legislative and regulatory decisions, and some Vermonters may be concerned that complex payment reforms can be difficult to understand and evaluate from the outside.

Economically, the bill is a calculated bet that investing more in primary care will yield downstream savings and greater security for Vermont households by preventing illness, reducing expensive hospital use, and supporting community-based care. The provisions to transition care from hospitals to community settings and to revisit site-neutral reimbursements aim to reduce cost pressures tied to high-price settings and ownership-driven differentials. Yet the transition carries risks: short-term spending could rise before savings materialize, and practices and insurers may incur substantial transition costs.

The exploration of a regional universal primary care program underscores Vermont’s recognition that sustainable coverage and payment reforms may benefit from broader regional collaboration, but it also highlights how dependent Vermont is on federal policy and neighboring states’ willingness to engage. Still this openness to innovation is promising.

Some will see S.197 as an overdue step toward adequately funding primary care and aligning incentives with better health outcomes, even if that requires near-term investment. Others may be concerned about the lack of fully developed enforcement mechanisms for spending targets, the administrative complexity of new models, and the risk that payment reforms fail to address deeper structural issues such as workforce shortages and hospital financial stability. The bill does not settle those debates, but it does lay out a structured process for Vermont to gather better information, test new payment approaches, and consider more ambitious regional solutions in pursuit of a more accessible, sustainable primary care system.

Current Status:

The bill has been passed by the Senate and is now being reviewed by the House Health Care Committee.

Last updated: 4/10/2026

DISCLAIMER: Generative AI used to assist in the production of this report.