Healthcare Reform

S.126 Senate Health Care Bill – A Smarter Path Forward: Reforming Vermont’s Health Care System

Vermont is at a turning point when it comes to health care. Costs continue to rise, access remains uneven—especially in rural areas—and small community hospitals are struggling to keep up. The result? A system that’s straining patients, providers, and taxpayers alike. That’s why the Senate is advancing S.126, a bill aimed at lowering costs, expanding access, and building a smarter, more sustainable system for all Vermonters.

At the heart of this proposal is a shift to reference-based pricing—a model that sets hospital and other provider payments based on a percentage of Medicare rates. This move will standardize costs for common procedures, reduce administrative burden, and make health care pricing more transparent and fair. It also gives hospitals, providers, and insurers greater budget predictability while helping to bring down insurance premiums over time.

Global Budgets will establish annual targets for hospital expenditures and provide additional predictability and financial stability within our system of care

Health care costs are not just a health issue—they’re driving up property taxes and education budgets, with health care costs making up nearly 13% of district spending. And while major institutions can weather these increases, small and rural hospitals are facing real financial risk, putting local access to care in jeopardy.

S.126 also invests in preventative care, expanding support for mental health and substance use treatment through Vermont’s proven Hub & Spoke model. The goal is to make hospitals a last resort—not the default—by ensuring access to early, integrated care in every community.

Finally, the bill creates a State Health Care Action Plan, a roadmap to meet local needs and guide smart, long-term investments.

Health care reform can feel daunting, but the direction is clear: lower costs, better outcomes, and a system that works for all Vermonters—no matter their zip code. S.126 is a step toward that healthier future.

“Healthy Futures: A Smarter Path for Vermont Health Care”

Smarter Pricing for Predictable Costs

We’re moving toward reference-based and global budget pricing models to make hospital payments more predictable.
We are moving toward sustainable payment for non hospital services.
This change will help set realistic budgets for providers and insurers alike.

Lower Costs, More Stability

Patients will benefit from lower health care costs and more stable insurance premiums.
We’re building a system that puts affordability and access first.

Better Access, Especially in Rural Vermont

Expanded investment in primary care access ensures that more Vermonters, especially in rural areas, get the care they need—close to home.

Stronger, More Secure Hospitals

By creating financial stability for hospitals, we protect jobs, services, and local economies—especially in underserved regions.

Less Red Tape for Providers

A reduction in administrative burden means providers can focus more on care and less on paperwork.
Better medical record sharing also improves continuity of care for patients.

Predictable Budgets for Everyone

Hospitals and insurers will benefit from clearer financial planning, which means fewer surprises and more efficient care delivery.

A Plan for the Whole State

A new State Health Care Action Plan will address the unique needs of Vermont’s diverse communities, guiding smart, long-term investments in public health.

Bottom Line:
Healthy Futures means better care, lower costs, and a health care system that works for all Vermonters—no matter where they live or what they earn.

Vermont’s Health Care Crossroads: Why Reform Can’t Wait

Health Care Costs Are Driving Up Property Taxes

Soaring health care costs are not just a health issue—they’re an economic issue.
They are a major contributor to rising property taxes and education costs in Vermont, making up 13 percent of district budgets (administrative costs are 5 percent).

Small and Rural Hospitals Are Being Hit the Hardest

While larger institutions like UVMMC or Rutland can absorb financial shocks, smaller rural hospitals and community clinics are struggling to survive.
This puts local access to care at risk for thousands of Vermonters.

Rising Costs Hurt Our Economy

Even a 1% increase in health care costs can lead to lower per capita income, reduced tax revenue, and fewer job opportunities.
Health care inflation weakens our overall economic vitality.
The root of our affordability crisis is the cost of health care.

Higher Costs ≠ Better Care

There is no clear link between higher spending and better health outcomes.
In fact, the opposite is often true—spending more without reform means less access, more waste, and worse outcomes.
Reducing health care costs and medical debt saves lives.

Prioritize Preventative and Integrated Care

Hospitals should be a last resort for care—not the default.
We incentivize preventative care by increasing payments for mental health and substance use providers, especially in the Hub & Spoke model.
Continued integration of medical and community-based services ensures Vermonters can access the full spectrum of care—from chronic disease management to crisis intervention.

Conclusion:
Vermont is at a health care crossroads. If we don’t address rising costs, invest in prevention, and support rural and community-based providers, we risk both our economic future and the wellbeing of our people. Now is the time for bold, compassionate reform.

Reference-Based Pricing: A Simple Guide

What It Is:
Reference-based pricing helps control health care costs by paying hospitals the same price for the same services—based on a set percentage of what Medicare pays. For example, a hospital might get 200% of the Medicare rate for a certain procedure or set of services.

Why It Matters:

Makes hospital costs more predictable.
Helps lower insurance premiums over time.
Reduces paperwork for health care workers.
Makes prices more fair and clear for everyone.

What’s Considered:
When setting prices, the state will look at:

Community health needs
Local labor and cost of living
Patient insurance types (private, Medicare, Medicaid)
Social and health risk factors

How It Helps Patients:

Helps lower the high prices private insurers pay.
Should lead to lower insurance premiums within three years.

Protecting Hospitals and Services:

Big hospitals like UVM Medical Center have seen big cost increases—this plan keeps that in check.
Hospitals can’t raise prices for some services to make up the difference as changes occur.
If any hospital plans to cut services, they must notify state leaders within 90 days.

Next Steps:
The state will also seek global budgeting—a yearly spending limit for hospitals—to keep care affordable while still supporting quality care.

This plan is about fairness, transparency, and long-term savings—for patients, hospitals, and the whole system.

*Many thanks to Senator Lyons and Erin Stoetzner for creating this content.