Impact of a State-Level All-payer System

• Abstract
• Purpose of health policy or idea
• Characteristics of this policy
• Political and economic background
• Purpose and process analysis
• Expected outcome
• References

Abstract

With the push for national health reform, some policymakers? attention has turned to Maryland?s all-payer system, which established uniform hospital reimbursement rates for all payers in the state. The system has slowed the growth of health care costs in Maryland and improved patient access to hospital care without curbing hospital profits. Despite the system?s achievements, policymakers and analysts have been debating its scalability and political feasibility as a national reform option.

Purpose of health policy or idea

For Maryland hospitals, the 1960s were a period of rapidly rising costs and ongoing struggles to shoulder the financial burden of treating growing numbers of uninsured patients. In 1971, in response to demands from the Maryland Hospital Association for rate regulation, the legislature passed an act that established an all-payer system for the state. The law established a commission that was tasked with five key objectives:

• Make fees for services affordable and equitable across hospitals
• Increase transparency of hospital financials
• Constrain growing hospital costs
• Make hospitals financially stable
• Ensure access to hospital care for all Marylanders

The commission established by the act was empowered to review and approve rates for all hospital services at all hospitals in the state, public and private, in order to eliminate the large disparity in reimbursement rates among hospitals, and to incentivize all hospitals to treat all patients, regardless of their ability to pay. By establishing uniform rates, the system in effect spread the burden of care of uninsured patients across all providers equally, with no discounts or advantages to specific individual payers or classes of payers. The law thus creates an incentive for all hospitals to treat all patients, regardless of insurance status, and any citizen can be treated at any hospital, regardless of his or her ability pay. The system has thus abolished patient "dumping" at "last-resort" hospitals, and so-called cost-shifting and cross-subsidization, in which the costs of treating the uninsured are passed on to paying patients. The system sets only the rates that hospitals receive from payers for inpatient, outpatient and emergency services rendered; it does not set physician fees.

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral

While the all-payer system is a unique one among U.S. states, it is not an innovation when considered in a global context. Further, while Maryland's system enjoys widespread support among a board variety of stakeholders in the state, the notion of a national all-payer system or regulatory board similar to the HSCRC has proven controversial. 

Political and economic background

Maryland's all-payer system was established by a 1971 law passed by the state legislature, which established the creation of the Health Services Cost Review Commission (HSCRC). The HSCRC was given the power to set reimbursement rates for all public and private payers in the state; it was also given the responsibility of making all hospital data transparent and accessible to the public. In order to set rates for all public payers, the state sought a Medicare waiver, which it obtained in 1977; the waiver, which exempted the state from adhering to Medicare and Medicaid reimbursement rates, has often been referred to as the "linchpin of the system."

The Commission is independent of the governor's administration, though it consists of seven governor-appointed, volunteer commissioners who serve staggered four-year terms; only three of the four commissioners may be affiliated with providers in the state at any time. To enable the HSCRC to set fair rates, the legislature authorized it to collected a wide range of data from hospitals on costs, patient volume and characteristics, and overall financial status.

The law required the commission to set "prospective" rates based on real costs. Outpatient rates were set on a fee-for-service basis. Inpatient rates were determined by unit of time and hospital department; for example, there is a set per-minute rate for operating room use. By law, the commission was also required to set maximum markup rates for all hospital charges; markup rates have varied over the last three decades, but have ranged from a low of 18% above costs to a high of 22% above costs. (By contrast, markup rates in hospitals across the U.S. range as high as 400 percent, and average 187%.)

Change of government

The law established a new state-level board to regulate one aspect of the health care market

Complies with

The state's system was only made comprehensive and fully equitable through a Medicare waiver obtained in 1977.

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Origins of health policy idea

The idea of rate regulation was initially proposed by the Maryland Hospital Association as a solution to rising hospital costs and the growing problem of uncompensated care. Both the legislature and the state had concluded that the unregulated hospital care market was contributing to skyrocketing costs for many hospitals and an inequitable system of care. Government leadership in setting rules for medical care payments was already in place in other countries with a combination of public and private payers, including France, The Netherlands, Japan and Germany; in such all-payer systems, health care costs were indeed lower. The commission established by the Maryland legislature mirrors the activities of state-sponsored health care market regulators in other nations.

In the U.S., Maryland's system is unique. To date, Maryland is the only U.S. state with a comprehensive, established and operative all-payer system and a related Medicare waiver. The system has met the 1971 law's intended objectives of cutting costs and reducing cost-shifting and has shielded Maryland patients and hospitals from widespread price variation among hospital services seen elsewhere in the United States.  

Initiators of idea/main actors

• Regierung

• Kostenträger

• Patienten, Verbraucher

• Privatwirtschaft, privater Sektor

Approach of idea

The approach of the idea is described as:
new: The approach is not new to Maryland, but unique among state and national policies employed to curb health care spending in the U.S.

Stakeholder positions

The HSCRC is politically independent and widely supported by hospitals, public and private payers, and legislators in both political parties. The system is widely regarded as having created a market in which payments are predictable, transparent, and fair, and in which profits have not suffered as a result. Providers are protected from having to negotiate rates with payers; payers, meanwhile, are shielded from the high markups attached to hospitals services in other states; and patient access to hospital care is protected (indeed, the Maryland health Care Commission says that as a result of the system, the state no longer needs public hospitals). As HSCRC Commissioner David Young reported in a recent statement, "Of all the accomplishments of the All-Payer System in its thirty-eight year history, and there have been many, nothing stands out to me more than the willingness of all participants - providers, payers, business and labor, and HSCRC staff - to put aside provincial interests in favor of producing the healthiest hospital system in America."

Actors and positions

Regierung
Maryland Legislature	sehr unterstützend		stark dagegen
Kostenträger
Private payers	sehr unterstützend		stark dagegen
Public payers	sehr unterstützend		stark dagegen
Patienten, Verbraucher
Uninsured patients	sehr unterstützend		stark dagegen
Insured patients	sehr unterstützend		stark dagegen
Privatwirtschaft, privater Sektor
Maryland Hospital Association	sehr unterstützend		stark dagegen

Actors and influence

Regierung
Maryland Legislature	sehr groß		kein
Kostenträger
Private payers	sehr groß		kein
Public payers	sehr groß		kein
Patienten, Verbraucher
Uninsured patients	sehr groß		kein
Insured patients	sehr groß		kein
Privatwirtschaft, privater Sektor
Maryland Hospital Association	sehr groß		kein

Positions and Influences at a glance

Adoption and implementation

 

The all-payer system was voted into effect in 1971, phased in over the following three years, and not completely comprehensive (ie, inclusive of Medicare payments) until 1977. Today, the Commission, with an operating budget of $4.9 million, sets rates for 53 hospitals that generate more than $13 billion a year in revenue.

Flexibility established in the letter of the original law has allowed the commission to adopt changes to rates and rate-setting protocols as necessary. In 2001, for instance, the HSCRC began employing severity-adjusted Diagnosis-Related Groups (DRGs) to classify cases for the purposes of rate-setting; in 2008, the commission began using Ambulatory Patient Groups instead of a fee-for-service system for setting outpatient service rates.

The system continues to adopt new programs and incentives to improve quality and cut costs. In 2008 it adopted a pay-for-performance program that will reward hospitals that adhere to evidence-based measures with heart failure, pneumonia and acute myocardial infarction patients and in the area of surgical infection prevention.  A separate pay-for-performance initiative was approved in early 2009 to encourage hospitals to reduce the rate of hospital acquired conditions. A third program evaluates and rewards hospitals for beating expected readmissions levels. These and other measures are being adopted to discourage excess growth in hospital volume, which has been blamed for higher-than-expected costs for the system as a whole (Murray 2009).

Monitoring and evaluation

 

The commission collects comprehensive data on hospital operations for all 53 hospitals in the state, all of which adhere to standardized accounting guidelines. Collected data includes revenue, expenses and volume figures; audited financial statements; wage and salary data for 75 classes of hospital employee; and clinical, demographic and billing information for all inpatients and outpatients. Each year, the HSCRC releases a minimum of five major reports: an annual report on hospital operations; a report on the financial stability of the state's hospitals; a report that compares pricing and quality across hospitals; a report on uncompensated care; and reports on audits commissioned by HSCRC. The Commission also produces regular reports comparing and monitoring charges and volume over time.

HSCRC reports are made publicly available on the Commission's website. The annual Disclosure of Hospital Financial and Statistical Information is used to set hospital rates, ensure that set rates are in line with costs, and compare Maryland's cost increases with those of the rest of the nation.

Results of evaluation

Generally, Maryland's all-payer system is credited with controlling hospital length-of-stay, cost per admission, and payment levels from one year to the next (Murray, 2009). From 1976 to 2007, the average cost of a hospital admission in the state of Maryland fell from 26% above the national average to 2% below the national average. From fiscal year 2007 to 2008, the average cost of a hospital stay in the state rose 4%, compared to 5.5% nationally. 

Over the thirty years since the system's inception, Maryland had the lowest markup of hospital charges of any state in the U.S. The cost per admission also increased more slowly in Maryland than in any other state during that time. The savings and financial stability engendered by the system also receive credit for granting the state the lowest health insurance premiums (as a fraction of income) in the country.

Expected outcome

A recent analysis in Health Affairs reported that Maryland's all-payer system has resulted in savings of $40 billion since 1976, based on the national average for hospital spending. Had a similar system been in place over the same period of time for all states, according to the HSCRC, savings would have totaled $1.8 trillion or more (Murray, 2009). The system is also credited with improving access to hospital care, keeping markup charges well below national averages, improving the financial stability of Maryland hospitals, and winning the broad support of a variety of stakeholders through the transparency it has created.

In the recent debate over health policy reform, some policy experts have proposed that an all-payer system, like Maryland's, could be a feasible means for encouraging rational pricing in the private health care market and a "less radical" approach to controlling health care costs than the currently debated public plan option (Ginsburg, 2009). Former Senator Tom Daschle has promoted the formation of a federal health board (a board that would operate much as the HSCRC does) in 2008; others have suggested that a similar board be established to, at the very least, independently determine Medicare rates. Though many experts have promoted a similar system of rate-regulation as a means of controlling health care costs as part of national health care reform, the option also has its detractors. Opponents have argued that the transition to such a system would be stalled by near-insurmountable challenges, and that a national all-payer system would likely retain - or only very slowly level - currently existing payment differences among public and private payers. Despite Maryland's achievements with such a system, all-payer rate regulation has received relatively little attention compared to other policy options, and is unlikely to figure into current efforts to reform health care in the U.S.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch

As noted above, Maryland's system is credited with improving access to hospital care for all patients, making pricing more equitable, and generating substantial health care cost savings for the state.

References

Sources of Information

Adashi, Eli. "In Annapolis, Lessons on Bending the Curve." The Washington Post, October 2, 2009.

Ginsburg, Paul. "All-Payer Rate-Setting: A Response to 'A Modest Proposal' from Uew Reinhardt." Health Affairs Blog, July 24, 2009.

Maryland Health Services Cost Review Commission. http://www.hscrc.state.md.us/

Murray, Robert. "Setting Hospital Rates to Control Costs and Boost Quality: The Maryland Experience." Health Affairs (28) 5: 2009, 1395-1404.

Oberlander, Jonathan and Joseph White. "System-Wide Cost Control - The Missing Link in Health Care Reform." NEJM Health Care Reform 2009, Sept 2, 2009. http://healthcarereform.nejm.org/?p=1627.

White, Joseph. "Cost Control and Health Care Reform: The Case for All-Payer Regulation." Campaign for America's Future. May 12, 2009. http://www.ourfuture.org/files/JWhiteAllPayerCostControl.pdf

Author/s and/or contributors to this survey

Elena Conis

Empfohlene Zitierweise für diesen Online-Artikel:

Conis, Elena. "Impact of a State-Level All-payer System". Health Policy Monitor, October 2009. Available at http://www.hpm.org/survey/us/a14/5