For nearly 40 years, Maryland has done things differently when it comes to health care. 

Ours is the only state that sets the rates hospitals can charge for the services they provide. It is now being dramatically updated for a new era of care.  For forty (40) years, hospitals have been paid to treat patients when they were ill or injured.  Under the new Medicare Waiver Proposal, hospitals will have financial incentives to keep Maryland’s population healthy, and out of the hospital.

What is unique about Maryland?

In Maryland, state regulators set hospital rates for everyone who pays for hospital care, from Medicare to private insurance companies to the self-insured; hospitals do not set their own prices, as they do in the rest of the country.  These rates factor in the cost of hospital care for the uninsured, so those with insurance pay for the hospital care of those without health insurance or means.  Hospitals are not allowed to negotiate their rates with CareFirst or other payors as they do in the rest of the country.  This unique arrangement exists because of a 40-year-old agreement that Medicare will pay the same rates as others in Maryland pay, as long as spending on hospital care in Maryland stays below that of the rest of the country.

Maryland’s system of paying hospitals for the care they provide has brought predictability and stability for hospital budgets, has ensured that everyone who needs care receives it regardless of their ability to pay, and has given Maryland the opportunity to pursue performance and health care reform by making it possible for our state to implement innovative payment and quality improvement programs.  It has not brought efficiencies or a guarantee of high quality care.  Central Maryland has more hospital beds than most areas in the country, has a high re-admission rate, and ranks near the bottom nationally in many core quality indicators.

This system has moved spending on hospital services in Maryland from 25 percent above the national average to 4 percent below the national average.  It has saved Maryland $45 billion over four decades through lower costs and lower health insurance premiums.

How has it been updated?

As we all know, health care has changed dramatically, and the conditions of the state’s arrangement with Medicare needed to change not only to keep up, but also to be ready for a new future of care, where more emphasis is on prevention and the health of the community.  The Medicare Waiver Proposal shifts the basis for hospital rates from payment for each procedure or episode of care to keeping people healthy and out of the hospital.  Over the past year, Maryland’s hospitals worked with state and federal officials to update those conditions by striking a balance between risk, innovation, and the preservation of our unique system.  The new arrangement, if thoughtfully implemented, may lead to lower costs, higher quality, and a healthier Maryland.  It includes untested, and as yet, only loosely defined spending targets and tools that hospitals need to enhance the delivery of care for patients and communities, with a focus on keeping people well in addition to caring for them when they are sick or injured.

What happens now?

The Medicare Waiver Proposal will require the development of new and complex guidelines, tests, metrics and reporting tools for which there is no precedent.  Targets have been set with no effective means to model how attainable they may be.  Private insurers are not required to limit growth, premiums or to share population health data.  Implementation has been left to a small state agency, the Health Services Cost Review Commission (HSCRC) with new leadership and a limited budget.

Hospitals should do their part to make sure Maryland’s unique system of paying for hospital care benefits the people who walk into Maryland hospitals.  Hospitals should seek to stay on the cutting edge of technology and innovation.  Hospitals should expand efforts by reaching out into the community to work with others along the care path, from doctors and pharmacists to home health providers and many others, to help our community be healthier.  Finally, Hospitals should take a hard look at how they deliver care to people, how they are organized, and how they can change to help keep people healthier and out of the hospital.

The State should work hard to make sure the HSCRC has the funding, staff, support and composition to handle this formidable job.  The State should also eliminate its tax on non-profit hospitals in the form of an assessment on Medicaid Care for the poor since it undermines the new Proposal and shifts the State’s obligations to hospitals, private payers and ultimately individuals and companies who pay for health insurance.  Private payers should be held to limits on rate increases tied to the growth of the State economy and population health, just as hospitals are under the new proposal.  Insurers should also be required to share population health data to allow hospitals to determine how best to keep people healthy.

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