Maryland health waiver could serve as national model, officials say

A top official with the Centers for Medicare and Medicaid Services said Friday that a state plan to reduce hospital visits could serve as a national model for curbing costs while improving patient outcomes.

Deputy Administrator and Director Jonathan Blum said the approach could disprove the notion that quality health care must be expensive. While other programs already have shown this across the country, he said, Maryland would be the first to test the premise statewide.


"We want Maryland to be the basis for other states ... to test the boundaries of what it means to lower total cost of care and boost total quality of care," Blum said.

Blum made his remarks at Mercy Medical Center in Baltimore, where he was joined by Gov. Martin O'Malley, Lt. Gov. Anthony G. Brown and members of Maryland's congressional delegation to celebrate approval of the plan by CMS.


The plan is an update to a special waiver the state has had with the federal government for 36 years that allows it to set hospital rates through a special commission. In other states, hospitals typically set their own rates, while Medicare dictates rates for its patients.

Because of this, the rate of hospital cost increases is lower in Maryland than in other states. In exchange, the federal government grants Maryland larger Medicare payments to offset the costs of uncompensated care for people who can't or don't pay. All insurers pay generally the same rate for a procedure at a particular hospital, although rates vary from hospital to hospital.

The state had sought to modernize the waiver to focus more on preventive care and keeping people out of hospitals. It increasingly found it difficult to meet the waiver test that requires it to show Medicare costs grow more slowly in Maryland than elsewhere.

The new plan ties hospital spending to the state economy and eliminates a system in which hospitals are paid based on the number of patients they admit. The state's hospital costs must not grow faster than 3.58 percent in the first five years. That's the state's average annual growth in the past decade.

Instead, hospitals will receive a pool of money to treat a specific population.

"We have to get beyond the per admission," Sen. Ben Cardin said. "We have to manage a patient's care. The system rewards quantity instead of quality. We want the system to reward quality and manage a patient's care."

Insurers and hospitals support the plan, but it will mean drastic change for hospitals. CMS agreed to give the state five years to generate $330 million in Medicare savings or lose the waiver and convert to the system that other states use.

At least one critic thinks it will be hard for hospitals to cut costs in such a short time frame and that it could compromise patient care.


"I think it will compromise health quality and health care access, basing all of this on money," said Del. Patrick McDonough, a Republican.

Gene M. Ransom III, CEO of MedChi, which represents the state's physicians, said his group supports the new waiver, but how it is implemented is critical. Some of his members worry that if they want to order a certain procedure or test, they might get push back from hospitals.

"As we have this rush to control costs, what happens to access to care and what happens to quality of care?" Ransom said.