This assignment is an analysis of local, state, or federal health policy.
Select a state health policy reform innovation
Discuss the rationale for the policy, how it was adopted (e.g., federal waivers, passage by state legislature), the funding structure, and (to the extent statistical data are available) its impact. ethical outcome based on evidence.
Examples of state innovations include Marylands hospital rate-setting, Vermonts single-payer system, and Massachusetts’ health reforms
Analysis of State Health Policy
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Analysis of State Health Policy
Introduction
For all aspects of healthcare, there must be binding rules that control and govern the rights and responsibilities of governments, companies, health workers, civil society, and citizens. These rules, together, make up the legal framework for health care. Healthcare laws in the US can be enacted and reinforced at the federal, state, or local governments (Johnson & Quincy, 2020). Maryland as a state has several healthcare laws aimed at improving care delivery, patient outcomes, preventive care, access to care, and other benefits. One of the most famous health laws in Maryland is Maryland’s All-payer Hospital Rate Setting System. The hospital rate-setting system establishes uniform rates for hospital services for multiple payers (Johnson & Quincy, 2020). When every payer in the state is involved, as in the case of Maryland, then the system is referred to as an all-payer hospital rate setting. In that regard, the purpose of this paper is to discuss Maryland’s All-payer Hospital Rate Setting System.
Maryland’s Hospital Rate Setting/All-payer System
Since 1971, Maryland has been operating under a unique hospital payment system in financial ability to provide efficient, high-quality services to all Marylanders, and to increase the equity or fairness of hospital financing. The approach was created in Maryland when there were rapidly rising hospital costs and significant financial losses by hospitals treating a large number of uninsured patients (Sharfstein et al., 2018). In pursuit of the goals (cost containment, access, solvency, and equity) the legislature focused on certain founding principles which include Maryland solution, social mission, fairness and equity, solvency, regulation, public accountability, trust and cooperation, and perceptive payment (Bakhamis et al., 2018). They preferred a Maryland solution rather than a nationally dedicated program.
Additionally, legislatures believed that social mission was above every other interest and that hospitals should serve all patients in need regardless of their financial status. Regarding fairness and equity, Maryland believed, as noted above, that all payers should share the burden of financing the social mission equitably. Also, Hospitals must fulfill their mission efficiently and effectively (Haber et al., 2019). Society must maintain the solvency of efficient and effective hospitals. Legislatures also concluded that regulation was necessary for the market for hospital services. All these principles contributed to the development of this legislation.
Hospital rate regulation in Maryland was created by an act of the 1971 Maryland legislature. This law was passed with the strong support of the Maryland Hospital Association (MHA). The Maryland Hospital Association initially proposed rate regulation as a means of financing the growing levels of hospital uncompensated care (Johnson & Quincy, 2020). In response to the proposal, the state legislature established the Health Services Cost Review Commission (HSCRC). This institution is a state agency with a wide range of powers of hospital rate-setting and public disclosure. It is an independent state agency with seven commissioners appointed by the governor (Maryland.gov., 2022). The HSCRC was initially allowed to extend its authority only to the rates hospitals charged to the non-governmental purchasers of care. However, in 1977, Maryland was the first of five states granted a waiver by the federal government exempting the State from national Medicare and Medicaid reimbursement principles. Maryland remains the only state to retain such a system.
The HSCRC was given broad responsibility regarding the public disclosure of hospital data and operating performance. It was authorized to establish hospital rates to enhance cost containment, access to care, financial stability, equity, and hospital accountability (Maryland.gov., 2022). Since then, all payers in Maryland pay hospitals based on the rates established by the HSCRC. The rate-setting authority of the HSCRC applies to 47 acute generals, three specialties, and three private psychiatric hospitals. The HSCRC’s rate regulatory authority applies to inpatient services and outpatient and emergency services at a hospital (Maryland.gov., 2022). However, the commission does not have the authority to regulate physician fees.
To make Maryland’s All-Payer System (MAPS) work, Maryland receives disproportionately enhanced funding from Medicare. Maryland as a State does not have enough money to fund its program, therefore, in practice, this increased funding translates to 49 states and the District of Columbia subsidizing the Maryland rate-setting program (Bakhamis et al., 2018). Maryland received a waiver from Medicare and agreed to pay the HSCRC-established rates in place of Medicare’s scheduled payments. Once the funds are given, HSCRC assesses the eligible hospitals and pays for the delivery of uncompensated care. The commission developed a uniform financial assistance application process that all hospitals must use to determine their eligibility (Johnson & Quincy, 2020). The HSCRC also requires all facilities to disclose their financial position and total costs incurred in care provision publicly, through the methods determined by the HSCRC. The HSCRC compiles all relevant financial and accounting information to accurately review and approve hospital rates.
Maryland’s All-payer Hospital Rate Setting System has had significant impacts on every aspect of healthcare and the social life of residents of Maryland. As a result, the law has undergone several improvements to cub some of the negative impacts (Bakhamis et al., 2018). The Maryland model that operated between 1971 and 2013 showed positive impacts on per-admission spending growth. It also improved the financial stability of Maryland hospitals. The average hospital cost per admission in Maryland went from 26 percent higher than the national average in 1976 to two percent lover in 2007 (Haber et al., 2019). Additionally, the hospital rate-setting system helped in creating a more equitable spread of the costs of uncompensated care and also helped in the elimination of cost-shifting among payers. However, Hospital admissions in Maryland increased at a rate of 2.7 percent from 2001 to 2007.
To address the issue, Maryland introduced a global budget system called the total patient revenue system (TPR) for hospitals as an incentive to reduce unnecessary admissions and readmissions (Johnson & Quincy, 2020). All hospitals that participated received a fixed global budget covering all inpatient and outpatient services based on the hospital’s revenue from the previous year. All the TPR hospitals reduced successfully the number of admissions, readmissions, and emergency department visits. For instance, between 2010 and 2014, a hospital in western Maryland reduced inpatient admissions by 32 percent and readmissions by 42 percent (Haber et al., 2019). In 2019, a study compared TPR hospitals and non-TPR hospitals and reported that emergency department admission rates, ambulatory surgery visit rates, and outpatient visits and service rates decreased by 12 percent, 45 percent, and 40 percent, respectively.
In 2014, Maryland introduced another initiative to improve the rate-setting program. In 2019, Maryland submitted a progression plan to CMS, termed the Total Cost of Care (TCOC) model. Since the last modification of Maryland’s All-payer Hospital Rate Setting System, there have been significant positive impacts on the healthcare system as well as the entire society (Sharfstein et al., 2018). For example, both the total expenditures and total hospital for Medicare beneficiaries were reduced without shifting costs to other parts of the healthcare system. With a five-year cost-saving goal of $330 million, Maryland saw cumulative Medicare savings in hospital expenditures of $796 million through 2019.
The reductions in Medicare hospital expenditures are due to reduced spending for outpatient hospital care services. Additionally, inpatient admissions and Medicare readmission rates have been reduced. An earlier evaluation reported that Maryland experienced decreased Medicare readmissions compared to the national average by 116 percent between 2013 and 2017 (Haber et al., 2019). The all-payer system allowed the state to achieve the most equitable hospital payment system in the U.S. Additionally, as a result of the legislation, hospitals now must accomplish their mission effectively and efficiently. Also, society must maintain the solvency of efficient and effective hospitals. According to Haber et al. (2019), Medicare expenditure growth, both in total and for hospital services, was slower than in the comparison group, just in 4 years of the All-Payer Model. Also, Medicare beneficiaries had a 2.8 percent slower growth in total expenditures.
Conclusion
Healthcare laws and regulations in the US can be enacted and reinforced by the federal, state, or local governments. Maryland’s All-payer Hospital Rate Setting is one of the state laws that are established to regulate health care at the state level. It was created in 1071 to address the increasing costs of healthcare. The act established the Health Services Cost Review Commission (HSCRC) to set hospital payment rates. All the impacts of this law have also been discussed in this paper.
References
Bakhamis, L., Matsumoto, T., Tran, M., Paul III, D. P., & Coustasse, A. (2018). Maryland’s All-Payer Health Care System: a light at the end of a tunnel. The Health Care Manager, 37(1), 11-17. https://doi.org/10.1097/HCM.0000000000000180
Haber, S., Beil, H., Morrison, M., Greenwald, L., Perry, R., Jiang, L., … & Amico, P. (2019). Evaluation of the Maryland All-Payer Model, Volume I: Final Report. Waltham, MA: RTI International. https://downloads.cms.gov/files/md-allpayer-finalevalrpt.pdf
Johnson, A & Quincy, L. (2020). Hospital Rate Setting: Successful in Maryland, but Challenging to Replicate. Healthcare Value Hub. https://www.healthcarevaluehub.org/application/files/1715/9103/4248/2020_Update_Altarum-Hub_RB_1_-_Hospital_Rate_Setting_Final.pdf
Maryland.gov. (2022). HSCRC Overview. https://hscrc.maryland.gov/Pages/About-Us.aspx
Sharfstein, J. M., Stuart, E. A., & Antos, J. (2018). Maryland’s all-payer health reform—a promising work in progress. JAMA Internal Medicine, 178(2), 269-270. https://doi.org/10.1001/jamainternmed.2017.7709