The Health Care Blog: Massachusetts’ Problem and Maryland’s Solution

By MAGGIE MAHAR

While health care reformers argue about what it would take to “break the curve” of health care inflation, the state of Maryland has done it, at least when it comes to hospital spending.

In 1977, Maryland decided that, rather than leaving prices to the vagaries of a marketplace where insurers and hospitals negotiate behind closed doors, it would delegate the task of setting reimbursement rates for acute-care hospitals to an independent agency, the Maryland Health Services Cost Review Commission.
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The Health Care Blog: How Maryland “Broke the Curve”: A Solution For Massachusetts?

Massachusetts has succeeded in providing health care insurance for all but 2.6% of its citizens.

Yet the Commonwealth still struggles to make that coverage affordable. Health care inflation is driving Massachusetts’ system toward a cliff. Total outlays for medical services and products are climbing 8 percent faster than the state’s economy. Unless something is done to rein in the cost of care, health care spending in Massachusetts is projected to nearly double over the next 10 years, hitting $123 billion in 2020. State officials know they must find a way to put a lid on spending so that it grows no faster than the state’s gross domestic product. .

But how?

With that question in mind, The Massachusetts Division of Health Care and Policy (DHCFP) contracted with the RAND Corporation to develop a menu of cost containment strategies and options. In September RAND came back with a report that recommended 12 strategies for reducing health care bills.

Near the top of the list (right after “bundling” payments for doctors and hospitals), Rand suggested that Massachusetts set hospital prices by “establishing a regulatory board to determine appropriate rates for hospital inpatient, outpatient, and emergency department care, limiting payment to the minimum amount necessary to cover hospital operating expenses, and requiring all payers (both private insurers and Medicare) to adhere to the rates set.

In other words, Rand recommended that Massachusetts consider the “Maryland solution” (a.k.a. the “all-payer” strategy). Here’s a brief summary: In Maryland prices for all hospital services are set by seven commissioners appointed by the governor to four-year terms. When setting rates for at individual hospitals, the Commission takes into account each hospital's wages, charity care and severity of patient illnesses. Hospitals can appeal only to the commission or take the dispute to court.
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Shortage of Rural Docs in Maryland Predicted

The state association of doctors is saying that Marylanders who live in rural areas may soon see a shortage of doctors to treat them:

• The report, known as the Maryland Physician Workforce Study, concludes that a shortage of doctors in rural Maryland is likely to worsen significantly by 2015 as older physicians retire and new ones choose to practice elsewhere....
• The report ... recommends various legislative remedies, including higher physician reimbursement rates by insurers, medical malpractice reforms and a loan-forgiveness program to attract young physicians to regions most in need.