Beyond the political debates over the Affordable Care Act is a bipartisan consensus about the future of our nation's health care system. Across the political spectrum, officials and experts agree that we must shift from a near exclusive focus on treating people when they get sick to a balanced approach that also promotes health and wellness. Such a shift will both reduce costs for families and small businesses and keep many Americans from dying of preventable causes.
Our health care system's heavy reliance on "fee-for-service financing" generates lackluster outcomes, despite ever-increasing costs. By paying for every hospital admission and medical procedure, our system inadvertently discourages preventive care, undermines coordination of care and creates perverse incentives for costly, often unnecessary procedures.
In Maryland, we are taking a giant step away from this outdated system. We are adopting an innovative approach to setting rates for hospitals — one that supports lower costs, enables better outcomes and creates a better experience for patients. It will also accelerate efforts in support of community health and wellness.
For more than 30 years — thanks to the efforts of Sen. Barbara Mikulski, Sen. Ben Cardin and others — Maryland has had a unique all-payer approach to hospital payment. Under this system, an independent commission is charged with reviewing and setting rates for hospital services across all payers, including Medicare, Medicaid and private insurance carriers. As a result, all patients — including Medicare patients — at each Maryland hospital pay essentially the same rate for services, regardless of what insurance coverage they have.
This system has fairly distributed the costs of caring for the uninsured, limited the rise in hospital charges and eliminated cost shifting between payers. There are no stories of uninsured patients being billed far more than others in Maryland, as they sometimes are elsewhere, because everyone is treated the same.
But the current system has limitations. The structure dates back to a time when the focus of health care delivery was on inpatient services, and efficiency was measured by cost-per-discharge and average length of stay. The system was designed to provide incentives for treating people when they got sick — not for keeping them healthy.
That's why we're modernizing our unique system. Under the new approach — made possible by the Affordable Care Act and approved by the Center for Medicare & Medicaid Services — Maryland will implement a groundbreaking new system of health care delivery. Using the rate setting structure, the state will set global budgets and other alternative approaches to payment that reward clinical systems of care for providing improved outcomes at lower costs. Support for this new demonstration has come from a coalition of the hospitals, the insurance companies and the state all working together with a common vision.
A central goal of our new approach is to create incentives for keeping people healthy, and we're seeing it work in communities that have piloted this approach. Hospitals have invested in better transitions to primary care and to long-term care. They have developed creative partnerships with community and public health agencies to support prevention and wellness. Some have even been able to close wards as the need for hospital space has declined, and they have re-invested funds in keeping their local communities healthy. In short, these hospitals no longer have financial incentives to keep their beds filled; they have incentives to keep their communities healthy.
Under the new model, our hospitals have committed to achieving significant quality improvements, including reductions in readmission rates and hospital-acquired-conditions rates. We will limit the growth in hospital spending per capita, including inpatient and outpatient care, to the rate of growth in the state's economy. We will also control annual Medicare per capita hospital spending growth to a rate lower than the national annual per capita growth rate. Not only will this new system keep people healthier, it is expected to save the federal government at least $330 million in Medicare spending over the next five years.
The new model will complement a number of steps Maryland has taken in recent years to transition our health care system to better support health and wellness. We have built an electronic platform for medical records, which now connects hospitals across our state and serves as a common system for alerting doctors when their patients are in the emergency room, querying prescription databases to identify people abusing pain medications and generating maps of preventable disease and costs. We're also developing an innovative approach that links community health outreach and planning to primary care. And we have created Health Enterprise Zones to address persistent health disparities in five targeted areas across the state.
When the dust from today's political battles has settled, our nation will still need a health care system that works. Maryland intends to be a model for a system that prevents sickness, promotes wellness and reduces overall costs.
Martin O'Malley, a Democrat, is governor of Maryland. His email is firstname.lastname@example.org.
To respond to this commentary, send an email to email@example.com. Please include your name and contact information.