Maryland is preparing to transition to a federal health care model next year, which will determine how much consumers pay for medical care and how they access it.
However, a unique system in Maryland that has given the state control over Medicare rates for decades could come to an end under the Trump administration. Health advocates argue the state’s current system has helped to keep hospital costs down and prevent exorbitant cost growth.
“Any time hospital costs go up a lot, that hurts all of us,” especially the uninsured or those paying high out-of-pocket costs, said Vincent DeMarco, president of Maryland Health Care for All Coalition. He cited hospital costs, along with prescription drug costs, as primary drivers of premium increases.
“The last thing we need in Maryland is anything that would undermine this system that is keeping hospital costs and, therefore, health premium costs under control,” he said.
Details are being ironed out, and state officials said they’re working toward preventing changes that could boost health care costs and limit care. Industry analysts paint a worst-case future scenario that could lead to premiums rising and smaller hospitals shutting down.
Hospitals’ concerns center around how they will be paid and regulated, how they will manage costs across Medicare and Medicaid, and how the shift could impact operations and stability. Hospitals will operate under “global budgets,” or a fixed amount paid to cover all services for a set period. Primary care practices will transition into a “Primary Care AHEAD” program.
Maryland’s rate-setting system has evolved over the decades and currently aims to contain overall health care spending and better manage chronic conditions to keep patients out of the hospital unnecessarily.
The state sets its own rates for hospital services, with public and private insurers and self-paying patients paying the same. In most states, with voluntary rate setting, hospitals are not penalized if they fail to meet targets, while hospitals in Maryland that fail to meet targets must lower rates.
Under a system designed to keep providers’ costs below the national average, Medicare pays higher rates in Maryland than in other states, while commercial insurers pay less.
The federal AHEAD program largely mimics Maryland’s goals. The voluntary state model is designed to curb the growth of health care costs, improve population health and promote healthier living by emphasizing primary care. Last year, under the Biden administration, state officials signed an agreement with the Centers for Medicare & Medicaid Services that’s set to take effect in January. Maryland and Vermont are the only states that have moved past the application stage.
But changes could be brewing under President Donald Trump, and state and federal officials have been negotiating revisions for months. In September, CMS announced several changes, such as focusing on preventive care, including chronic disease prevention, and adding payment reforms for Medicare fee-for-service beneficiaries.
What could change in Maryland?
A key change for Maryland would eliminate an option for states to set rates for Medicare. The state has been granted a waiver to do so since 1977, allowing the state Health Services Cost Review Commission to set hospital rates for all payers, including Medicare fee-for-service hospital rates. Under Maryland’s “total cost of care” model, uncompensated care, self-paying patients and bad debt from those who can’t afford care are built into rates.
CMS “will permanently revoke the waiver that allows HSCRC to set Medicare FFS hospital rates on January 1, 2928,” an AHEAD model term sheet dated Aug. 15 says. “The HSCRC will not have any role in determining Medicare FFS hospital payments from 2031 onwards.”
Officials are currently working to finalize amendments based on the term sheet.
Maryland Department of Health officials say they hope to preserve elements of the current health model that will protect affordability and access to care as they negotiate an agreement with CMS and the Center for Medicare and Medicaid Innovation.
They argue Maryland has driven down health care costs while improving access and quality across the state. State and federal initiatives to expand health insurance in Maryland since 2007 have reduced Maryland hospitals’ costs for caring for patients without insurance or the ability to pay. That in turn reduced health care costs by more than half a billion dollars through 2023, a December 2023 analysis of health care data showed.
“We are very mindful of the broad impact of the AHEAD model in Maryland, across multiple constituencies including individuals, employers, insurers and health care providers, in addition to hospitals,” a Maryland Department of Health spokesperson said in an email to The Baltimore Sun. Officials did not elaborate on details.
A spokesperson for the Health Services Cost Review Commission said the health department’s response is “reflective of our answers as well.”
Just a tweak, at first
Changes will likely be minimal at least for the first couple of years, said Gerard Anderson, director of Johns Hopkins Center for Hospital Finance and Management. The AHEAD model will be put in place in phases through 2034. The proposed revocation of Maryland’s Medicare waiver would not happen before 2028.
“Maryland has been doing the total cost of care model for many years,” Anderson said. “This is just the next iteration.”
If Maryland’s Medicare waiver is revoked, Maryland would use the same payment system as Medicare, “which would be a serious problem for Maryland hospitals. They would have to change their entire payment and delivery system,” Anderson said.
Hospitals also would lose about $3 billion to $4 billion a year in federal funding, which is now embedded in the Medicare waiver, and would need to raise rates to adjust.
Similar goals, different strategies
Federal officials are considering ways of aligning Maryland’s model with the Trump administration’s goals, say parties involved in negotiations.
Questions remain about how “the federal government is going to look at the unique reimbursement model in the state of Maryland and align it with where they want to take the federal Medicare AHEAD program,” while still managing costs and ensuring access, said Mohan Suntha, president and CEO of University of Maryland Medical System, the state’s largest health care provider of hospital-based services.
“The hospital industry wants to get more clarity from the state and the feds as to exactly how this is going to work to ensure that we can still deliver on missions that we’re in business to deliver,” he said. The state has managed to “deliver value to our communities in terms of health care outcomes, health care quality and managing costs. We want to ensure that that ability is retained in whatever is negotiated going forward.”
A spokeswoman for the Maryland Hospital Association said the group has no “firm answers at this point” regarding impact.
“The state is still working out their agreement with CMMI and we’re unclear of all of the details,” said Amy Goodwin, the spokeswoman.
A spokeswoman for GBMC HealthCare said the system has been “closely monitoring” the transition.
” As we evaluate changes in health care policy, we remain committed to maintaining patient access to high-quality care while supporting hospital sustainability,” said Krystina Wales, the spokeswoman. “GBMC remains confident in our ability to navigate health care policy changes while upholding our mission of health, healing, and hope for the communities we serve.
Suntha added that the parties have similar goals of reducing costs and cost increases.
“Hospitals are always going to require the resources to ensure that we can continue to provide access,” Suntha said.
Negotiations are ongoing
Some say the negotiations appear promising. Many of the physicians’ concerns have been addressed, said Gene M. Ransom, the CEO of MedChi, the Maryland State Medical Society. That includes keeping “care redesign programs” in place, such as one that incentivizes physicians to provide additional care and lower-cost services to Medicare patients.
“The two parties have very different views of the world and very different ideas, but they’re kind of trying to work together to figure out how to do it,” Ransom said. “At any given time, there can be a detail that can cause problems or cause this thing to go awry, but so far we’re positively moving in a direction to try to keep something in place that doesn’t create chaos.”
Have a news tip? Contact Lorraine Mirabella at lmirabella@baltsun.com and (410) 332-6672.
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