Maryland Touted as New National Model for Keeping Hospital Prices Low

Can strict government regulation of medical costs successfully slash the price of healthcare?

An experiment announced Friday that will be tested in Maryland could be used as a national model if it's successful, reports The Washington Post. 

Maryland is the only state to operate an all-payer hospital rate-setting system under which all patients pay the same for services at the state’s hospitals, says Gov. Martin O’Malley’s office.

In most states, hospitals negotiate with insurance companies on prices, leading to variations within states and nationally, the Post says. In Maryland, all health-care customers pay the same price, saving money for consumers.

The governor's office says the new model will allow Maryland to reward systems of care that provide improved outcomes at lower cost. Support for this new model has come from a coalition of hospitals, insurance companies and the state, and it has been officially accepted by the Centers for Medicare & Medicaid Services in the U.S. Department of Health and Human Services.  

O’Malley and Lt. Gov. Anthony Brown joined Sen. Barbara Mikulski, Sen. Ben Cardin and senior officials from the CMS to announce the new system. 

“We need to shift away from our near exclusive focus on treating illness and move to a balanced approach that encourages prevention and wellness,” O’Malley said in a statement.

“Such a shift will reduce costs for families and small businesses and will simultaneously keep many Americans from dying of preventable causes.”

The model will limit the growth in hospital spending per capita, including inpatient and outpatient care, to growth in the state’s economy, the govenor's office says.

It will also limit annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate, the governor’s office says. The model is expected to save the federal government at least $330 million in Medicare spending over the next five years.