By Steve Bowden
There are many things that set Maryland apart from other states, such as its good seafood, its many bodies of water, and the Baltimore Ravens and Baltimore Orioles. But Maryland is also home to the only system of all-payer rate setting in the United States.
What is All-Payer Rate Setting?
Elsewhere in the United States, health insurers separately negotiate prices for medical treatments with health care providers. As a result, two insurers may pay different amounts of money for the same procedure at the same hospital. The amount of money health insurance companies pay for each procedure differs depending on how effective the insurers are at negotiating lower prices with the health care providers.
In the all-payer rate setting system that Maryland uses, health insurers collectively negotiate with health care providers to determine the amount of money that the health insurers pay the medical providers for each procedure. All-payer rate setting thus results in uniform costs for the same medical treatment; in an all-payer rate setting system, health insurers pay the same amount of money for the same procedure. All-payer rate setting systems may help decrease health care costs by increasing the bargaining power of health insurers, which theoretically enables them to negotiate lower prices for medical treatments than they could if they each negotiated separately with health care providers.
All-Payer Rate Setting in Maryland in the Past
Maryland, as well as a number of other states, implemented all-payer rate setting decades ago in an effort to control health care costs. Eventually other states ended the policy, in part due to the rise of health maintenance organizations. There is no consensus about exactly how helpful Maryland’s use of all-payer rating setting has been in reining in health care costs.
The Future of All-Payer Rate Setting in Maryland
In January 2014, the Centers for Medicare and Medicaid Services and Maryland announced that they would work together to make changes to the state’s all-payer rate-setting system. Historically, the Social Security Act has authorized Medicare’s participation in Maryland’s all-payer rate-setting system. Furthermore, in the past Medicare’s participation in Maryland’s all-payer rate-system system has been on the condition that there be a cap on how much Medicare pays per hospital admission.
The updated system of all-payer rate-setting in Maryland institutes multiple reforms. It eliminates the limitation on the amount of money that Medicare pays hospitals per admission. The modified system of all-payer rate setting also sets the maximum growth of per capita hospital costs for all payers to 3.58%. Under the modified all-payer rate setting system, there will be constraints on the annual growth of Medicare’s per capita hospital costs, which will be .5% less than then actual national growth rate between 2015 and 2018. Maryland and the CMS have at least to some extent implemented these changes, but it is not immediately clear what their impact has been thus far.
Steve Bowden is a first year MPH in Health Policy student at George Washington University. He currently works as a research assistant for the Health Information & the Law project, which is a website devoted to translating and distilling complex state and federal laws related to the use, collection, and exchange of health information. Previously he has interned for Enroll America and two different members of the U.S. House of Representatives. You can follow him on Twitter @steveabowden.