Decades of heavy regulation, price controls, and centralized decision-making have produced a healthcare environment in Vermont where costs continue to rise, competition is stifled, and incentives are misaligned. Instead of fostering an environment that would give patients more affordable choices, the state has created a healthcare system in which dominant providers have no real incentive to lower prices, and interested competitors face red tape that makes it difficult to enter the market.
The cost of care reflects these constraints on the market. Vermont consistently ranks among the most expensive states in the nation for healthcare, with insurance premiums significantly higher than the national average. Driven largely by high hospital prices and limited competition, marketplace premiums have been reported at more than double the U.S. average. These elevated costs place a growing burden on families, small businesses, and employers across the state (and they are compounded for taxpayers, who also shoulder the cost of healthcare for state employees).
One of the most glaring examples of overregulation is Vermont’s Certificate of Need (CON) process. Under state law, providers must obtain approval from the Green Mountain Care Board before opening new facilities, expanding services, or making significant capital investments. In practice, this system limits the supply of care by forcing providers to clear regulatory hurdles before they can grow or innovate. Whether building a facility, adding beds, or investing in new technology, providers must demonstrate to regulators that their services are “needed” before moving forward. This process can be time-consuming and costly, discouraging new entrants and protecting incumbent providers from competitive pressure. Worst of all, existing providers can effectively block new entrants by objecting during the approval process, allowing the status quo to prevail at the detriment of patients. Vermont recently made it easier for independent birthing centers to operate without undergoing the full approval process, but this limited reform leaves the broader regulatory framework intact and continues to suppress competition across much of the healthcare sector.
With so little competition, Vermont has resorted to alternative cost-control measures, but these efforts have failed to deliver meaningful relief for patients. Hospitals are currently subject to annual budget reviews and price controls by the Green Mountain Care Board, which sets limits on revenue and spending growth. In its most recent review cycle, the board capped increases in commercial prices and overall hospital revenues at roughly three percent annually in an effort to contain costs. Unfortunately, imposing growth caps without fostering competition does little to address the underlying drivers of high prices or encourage efficiency. Major hospitals may simply shift revenue strategies or expand profitable service lines instead of lowering prices for patients.
Vermont’s inflated prices become even clearer when compared to national benchmarks. Data shows that some Vermont hospital services are priced at more than 300% of what Medicare would pay for the same care, with certain outpatient services reaching over 400% of Medicare rates. Nationally, private insurers pay hospitals about 250% of Medicare on average. These differences translate to higher insurance premiums and out-of-pocket costs for Vermonters.
Another clear way Vermont could introduce market discipline to healthcare is through reference-based pricing (RBP). Under this model, insurers set a benchmark payment for a given procedure, typically based on Medicare rates or a fair market rate, and patients are responsible for any cost above that benchmark. Providers then know the “going rate” for services and are incentivized to offer care at or below that rate because patients can compare prices and quality – they can no longer overcharge simply because an insurer will pay. They must operate efficiently and offer competitive prices to attract patients, rather than relying on opaque billing practices. Instead of relying on government mandates or revenue caps, RBP uses market signals to encourage providers to offer care at sustainable prices. States like California, Minnesota, and Tennessee have used RBP for procedures ranging from joint replacements to outpatient care, achieving cost reductions of 20–40% compared with traditional insurance payment models.
Expanding access to telehealth is another critical way to improve healthcare affordability in Vermont. While the state made some strides during the COVID-19 pandemic, significant structural barriers remain. Licensing requirements and restrictive payment rules make it difficult for out-of-state clinicians to provide telehealth services, limiting competition, and keeping costs high. Evidence from other states and health systems shows that broader telehealth access can lower costs by shifting care to more efficient settings, expanding provider access, and improving convenience (particularly important in a rural state like Vermont!). When reimbursement rules and regulatory restrictions constrain flexibility, these savings are harder to realize, and patients are left with fewer affordable care options.
Despite ongoing efforts to regulate health care and effect spending controls, health care costs continue to rise, placing pressure on families, employers, and the broader economy. Introducing more competition and transparency into the system offers the only sustainable path forward. Reforms that expand price transparency, reduce barriers to entry, and allow alternatives like telehealth to develop more freely would introduce the competitive pressures currently missing from the system. Without those pressures, costs are likely to continue rising regardless of centralized approaches to control them.
