The All-Payer Model: Maryland’s Secret Weapon to Right Healthcare Costs

Nearly everyone has heard from the political left and progressives for plans to create a single-payer healthcare system, Medicare for all, or Medicare-optional programs. However, even many well-informed people don’t know about Maryland’s strategy to fight out of control healthcare costs: the all-payer model. This model, in place for nearly forty years, exempts the state from the Inpatient Prospective Payment System (IPPS) and Outpatient Prospective Payment System (OPPS) and allows Maryland to set rates for these services for Medicare, Medicaid, and Children's Health Insurance Program (CHIP) recipients. As part of an agreement with the national Center for Medicare & Medicaid Services (CMS), Maryland must limit inpatient and outpatient hospital per capita growth to 3.58 percent and save $330 million in Medicare costs over a five-year period. Additionally, they must meet several quality measures: matching national Medicare 30-day readmissions rates, reduce potentially preventable complications by 30 percent over five years, and submit annual reports on population health measures. [1]

This bold strategy seems to be working. From 2014 to 2016, Maryland saved $461 million in total care costs,
resulting in growth at 2.1 percent below the national healthcare growth rate. They even saved $586 million in hospital costs, which was 5.5 percent lower than the national growth rate and far more than the required $330 million in five years. Goals for improving patient care and reducing complications were also met. [2] In fact, complications were reduced 26.3 percent, per capita costs were kept at 1.47 percent, and Medicare saved $116 million in 2014 alone. [3] As a result of their success, CMS approved an extension through 2023 along with an expansion that went into effect on January 1, 2019. This expansion will include some doctor visits, mental health support, and long-term care instead of just hospitals as was previously done. [4] Considering that much of America’s healthcare expenditures come from long-term care of the elderly and chronic diseases, this expansion could result in additional savings while increasing quality of care. Under the new agreement, Maryland must meet a goal of $1 billion in savings by 2023. Some experts argue that this model works because it consolidates the demand-side of healthcare to engage in collective bargaining to rein in expenditures. [5]

The all-payer model has evaded attention for years, but that appears to be changing, even in a bipartisan fashion. While it was introduced under Governor O’Malley and the Obama Administration in 2013, it has continued and expanded under Governor Hogan and the Trump Administration in 2019. Furthermore, the Governor of Vermont, Peter Shumlin, has taken notice in his mission to move Vermont to a value-based care model in contrast to the fee-for-service model used for years. [5] Pennsylvania has also adopted global budgeting for their rural hospitals, while France, Germany, Japan, Switzerland, and the Netherlands use all-payer rate setting as the backbone of their universal coverage models. [6] With Congress divided and many states trying to solve their healthcare problems on their own, is the all-payer model the solution to their problems?

James Leckie

James is a second-year MPP student from Adamstown, Maryland, who serves as the Executive Editor for the Virginia Policy Review. He earned his bachelor's degree in Government & Politics and Philosophy from the University of Maryland, College Park. He is primarily interested in health policy and the intersection of policy and politics. Prior to enrolling in the University of Virginia, he worked on several state and federal political campaigns and worked for the American College of Radiation Oncology. You can contact the author here. ​

The views expressed above are solely the author's and are not endorsed by the Virginia Policy Review, The Frank Batten School of Leadership and Public Policy, or the University of Virginia. Although this organization has members who are University of Virginia students and may have University employees associated or engaged in its activities and affairs, the organization is not a part of or an agency of the University. It is a separate and independent organization which is responsible for and manages its own activities and affairs. The University does not direct, supervise or control the organization and is not responsible for the organization’s contracts, acts, or omissions.

References

[1] https://innovation.cms.gov/initiatives/Maryland-All-Payer-Model/
[2] https://www.healthcaredive.com/news/marylands-all-payer-model-saved-medicare-millions-in-first-
3-years/519458/
[3] https://www.advisory.com/-/media/Advisory-com/Health-Policy/2016/Maryland-All-Payer-Model-
White-Paper.pdf
[4] https://www.advisory.com/daily-briefing/2018/05/16/maryland-all-payer-model
[5] http://www.ncsl.org/research/health/equalizing-health-provider-rates-all-payer-rate.aspx
[6] https://theintercept.com/2017/07/24/single-payer-meet-all-payer-the-surprising-state-that-is-
quietly-revolutionizing-healthcare/