Massachusetts’ Problem and Maryland’s Solution

The Health Care Blog has a very interesting post, Massachusetts’ Problem and Maryland’s Solution.

"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.

Such adjustments are never perfect, but in this case, it appears that the Commission is treating hospitals equitably..Since the program started, the Wall Street Journal reports that Maryland hospitals have enjoyed a steady profit margin, unlike hospitals in other states that often make more money during boom years and less during a recession. Statewide hospital profit margins average 2.5% to 3%.—just enough of a surplus to give hospitals maneuvering room when setting budgets. Before the commission was established, Maryland hospitals were losing money covering the uninsured.

What is most remarkable is how state regulation of prices has contained costs. When the program began in 1977, the state’s hospital costs were 25% higher than the national average. Today, Maryland’s hospital costs are 2% lower than the national average. Meanwhile, over the same span, Maryland boasts the nation's second-slowest increase in hospital costs ."

It's worth reading the whole article.