The Democratic presidential candidates sparred vigorously over healthcare in their most recent debate. Front-runners Bernie Sanders and Hillary Clinton dominated the exchange, so talk of Maryland's singular hospital payment reform ended almost as quickly as it started.
Not that Martin O'Malley didn't try to tout Maryland's bold experiment on the national stage. “I have to talk about something that's actually working in our state,” said the presidential hopeful and former Maryland governor. O'Malley cut off Sanders. Moderator Andrea Mitchell cut off O'Malley.
“Andrea, Andrea, Andrea,” he interjected and quickly made a case for the Maryland model. In 2014, the state started to regulate hospital spending after nearly four decades of setting hospital prices for all payers, public and private.
Maryland's reforms won praise from Clinton. “And that's exactly what we are able to do based on the foundation of the Affordable Care Act. What Gov. O'Malley just said is one of the models that we will be looking at to make sure we do get costs down, we do limit a lot of the unnecessary costs that we still have in the system,” she said.
But she quickly turned her attention back to Sanders, who just hours before the debate, released more information about his single-payer healthcare proposal, which he calls “Medicare for all.”
Pundits and policy experts have generally dismissed the Sanders plan as a political nonstarter and still too vague on details to accomplish a transformation of the U.S. healthcare system far more complex than what's currently underway with the Affordable Care Act.
So what is happening in Maryland? And is it a good idea for it to be a national model?
“It could be done in any state in the union,” said Dr. Robert Berenson, an Urban Institute senior fellow and former CMS official. Look abroad for evidence that governments could do more to regulate health spending, he said, “It could be done.”
But that would take significant political will by states to more actively regulate hospitals, he said, which all states but Maryland abandoned. Maryland is also still an experiment, with encouraging early numbers, but no guarantee of success.
The state started setting hospital rates for private payers in 1974 and three years later won permission from the federal government to also set rates under Medicare and Medicaid. Maryland policymakers say that move has erased the cost-shifting that most U.S. hospitals rely on to make up for low rates from public payers.
Although the all-payer model allowed Maryland to significantly reduce its costs per admission, growth in the volume of admissions undermined its broader success in holding down spending.
So in 2014, Maryland agreed to set a budget for each hospital for all patients. The budget includes payment from every insurer. The state also promised that the budget would not grow faster than the state economy each year. A commission tracks hospital bills, hospital prices and patient volume. It also makes complex adjustments to account for very sick patients, transfers between hospitals, flu outbreaks and other factors that can increase or decrease demand for hospital services.
Maryland and federal officials hope that hospitals will work hard to stay under budget by avoiding unnecessary hospital care, and the state has pledged to save Medicare $330 million over five years.
The state's previous rate-setting system did nothing to control how many patients were admitted to hospitals or how much care hospitals provided, so spending soared.
“If you can only sell pants for $2, you will need to sell a lot of pants,” Joshua Sharfstein, former secretary of the Maryland Department of Health and Mental Hygiene, told the Urban Institute last November.
“Global budget is a huge shift,” Sharfstein said in an interview. He is now associate dean for public health practice and training at Johns Hopkins University.