Maryland’s Medicare Waiver

Maryland’s Medicare waiver is a unique agreement with the federal government that allows the state to set hospital rates.  It also serves as the foundation for an “all-payer system.”

Private insurers, Medicaid and Medicare pay the same price to hospitals in an all-payer system. Rates are not negotiated as they are in the other states and uncompensated care is shared by all providers. In Maryland, hospitals are paid based on the rates set by the Health Services Cost Review Commission (HSCRC), regardless of the payer. In every other state, the Centers for Medicare and Medicaid Services (CMS) pay providers at a discounted rate for Medicare patients and each state determines what they are willing to pay for Medicaid patients.  

As a result, Medicare pays more in Maryland than anywhere else.  But Maryland has to hold up its end of the agreement by keeping growth in hospital Medicare admission costs below national growth.  

This is becoming a literal “growing” concern as hospital costs in Maryland are growing faster than they are nationally, as Maryland moves less expensive cases to the outpatient setting and reduces unnecessary readmissions.  The waiver may be in jeopardy unless changes to the current agreement are made.   

The Maryland Medicare waiver, put in federal statute by Senator Mikulski, took effect in 1977 when the cost of a Maryland hospital admission was 26 percent above the national average.  By 2011, average hospital cost per case in Maryland was approximately 4 percent below the national average as a result of the waiver.

Hospitals in low income neighborhoods often treat patients who have a limited ability to pay for healthcare.  The money that Maryland gains annually as a result of Medicare’s willingness to pay its share of uncompensated care in Maryland helps to keep small town hospitals and urban hospitals in operation.  

Maryland’s Medicare waiver and rate setting system has been one of the most enduring and successful cost containment programs in the United States.   Maryland hospitals are able to control costs and boost the quality of care across the board regardless of the patient’s ability to afford care.  

For more information, please contact Mark Jensen at 410-583-2400 or