Vermont Enacts Landmark Laws to Control Hospital Drug Pricing and Reform Health Care Payments

Vermont Governor Phil Scott recently signed two key health care bills aimed at curbing rising health care costs and enhancing state oversight of hospital pricing practices. The first bill, H.266, caps the prices hospitals can charge for outpatient prescription drugs, such as cancer and autoimmune disease medications, at 120% of the manufacturers' average sales price beginning in 2026. This measure addresses the state's notably high markups, which currently average more than five times the manufacturers' prices. Exemptions exist for certain critical access hospitals not affiliated with larger networks.

The second bill, S.126, mandates long-term reforms, including creating a comprehensive statewide health care delivery plan due by 2028 and implementing reference-based pricing. This pricing model ties hospital charges for private insurers to Medicare rates, aiming to control cost inflation. The Green Mountain Care Board will develop this system by 2027 and is working toward a global budget payment model by 2030, which would provide hospitals with fixed annual budgets rather than pay-for-service reimbursement.

These legislative efforts respond to financial challenges faced by Vermont health care providers, patients, and employers amid escalating insurance premiums. Insurers like Blue Cross Blue Shield of Vermont expect these reforms to reduce their projected premium increases significantly. Meanwhile, hospital advocates caution that revenue reductions could necessitate operational adjustments.

Additionally, another law grants emergency authority to the Green Mountain Care Board to reduce hospital prices if insurers face insolvency risks, adding a protective mechanism for the overall health care system. Vermont's initiatives reflect a broader trend toward state-led strategies to manage health care affordability through pricing regulation and payment reform.