Health care reform: Caring about costs, too

By establishing a health benefit exchange and expanding Medicaid coverage, Maryland is on a path to extend access to affordable health care to hundreds of thousands of individuals, families and small businesses. For our progress to be sustainable, however, the growth in health care spending must be slowed and brought into balance.

According to the Kaiser Family Foundation, health spending in 1999 averaged $3,993 per person in Maryland, about the national average. Over the next decade, however, Maryland's per capita spending rose 88 percent to $7,492 in 2009, outpacing national growth by more than $500 per person.


Greater spending on health care has led to substantial increases in the price of health insurance. A recent Commonwealth Fund study found that between 2003 and 2010, Maryland employers experienced more than a 50 percent increase in insurance premiums for family policies. To cope with rising costs, Maryland employers have shifted a larger share of monthly premiums to employees and increased the use of deductibles and copayments.

Over the last decade, health care spending has grown faster than Maryland's economy as a whole. This means that many families and companies are paying a greater percentage of their income each year for coverage. Rising costs also threaten access to care. As costs go up relative to income, more businesses decide not to offer coverage — and even when insurance is offered, more families elect not to pay the premiums and become uninsured.


Changing this trajectory is essential to Maryland's future. Families need more room to use their savings for education, retirement and other priorities; companies need relief from ever-increasing premiums to invest in such areas as training and research and development. Progress on costs is also critical for the state budget, which includes both Medicaid and the state employees' health care program.

A key root cause of high health care spending in Maryland — and across the country — is a lack of balance in our health care system. The system has provided ample reimbursement for high-tech care for complicated illness while underpaying for the primary and preventive care needed to support people in health and wellness.

Maryland's health care system has become known for providing high-quality care — but very often for conditions that could have been prevented in the first place. The RAND Corp. found that improved access to primary care could have avoided many hospital admissions in our state. The Commonwealth Fund has noted high rates of readmission to Maryland hospitals, indicating that there is considerable room for improvement in keeping patients stable after discharge.

To make progress, we will need to align the delivery and payment of health care to the goal of better outcomes; wherever possible, we must pay for the value of services, not their volume. While this shift has begun in Maryland, it must move further and faster.

A more effective and efficient health care system starts with primary care. Every Marylander should have an attentive primary care clinician who supports prevention and health and has the time and resources to help navigate through complex diagnoses and treatment. Effective primary care can reduce the number of hospital admissions for chronic illness by 25 percent or more.

In recent years, primary care has been weakened by reimbursement systems that pay only for brief clinical office visits. Fortunately, new models of primary care called "medical homes" are emerging that support extra time and support for the chronically ill. The models include care teams with different types of health professionals playing important roles. Primary care practices that are medical homes can share in the savings when their patients are healthier at lower cost, with the remaining savings passed to Maryland families, businesses and taxpayers.

Such an approach has been pioneered on behalf of the state by the Maryland Health Care Commission; CareFirst BlueCross BlueShield has also implemented a promising medical home program. We will seek to build on these efforts so that all insurance companies can participate and all primary care clinicians and patients can benefit. To accelerate progress, we will use mapping technology to find "hot spots" of poor outcomes and high cost, allowing for targeting of outreach efforts and coordination with public health coalitions.

Change must also come to outpatient specialty care. As more patients face larger deductibles and co-payments, it is reasonable to expect that physician practices provide more understandable information about their cost and quality. To support better outcomes at lower costs, specialists should wherever possible be paid for a package of services (such as all care related to a knee replacement) and not individual services (such as each office visit, surgery, and re-operation on the path to a knee replacement). Working with physicians, patients, businesses and others, the Maryland Health Care Commission will explore setting standards for transparency and identify areas for creating packages of services. Maryland's Health Quality and Cost Council is planning to work with experts in the private sector to identify medical interventions that provide an especially high value to Marylanders — and suggest ways to design insurance plans that enhance access to these interventions.


Maryland's unique hospital rate-setting system has taken some important steps toward paying for value in health care. A number of rural hospitals have opted out of traditional payment-by-admission, instead accepting a set budget in advance. This novel payment structure, a "global budget," creates significant incentives to invest in community care and prevention. Many other hospitals in Maryland receive enhanced funding for certain admissions — but no reimbursement if the patient returns with 30 days. These hospitals are developing a much stronger relationship with primary care clinicians, long-term care facilities, community mental health and substance abuse treatment providers, home health agencies, and others to help patients manage their illnesses. An important next step is for these payment innovations to generate significant savings for those paying for care.

There are also opportunities to better align hospital efforts with those of community physicians and with medical homes. As spending on hospital care slows down, hospital systems will naturally expand their efforts in lower cost-settings — further supporting better outcomes at lower cost. Many of our state's hospital systems are well into this transformation. Through a modernization of the rate-setting system, Maryland can generate even more momentum and provide a model for others to follow.

Maryland's strategic initiatives will not just address costs; they will also improve health. With aligned incentives, health care organizations will be able to make the most of our nation-leading health information exchange, which allows critical medical records to be accessible at multiple points of care. We will see more partnerships with schools, local health departments, employers, and others to keep Marylanders active, tobacco-free, eating healthier, and well-immunized. We will see greater collaboration to support the care and independence of individuals with mental illness and substance use disorders. We will also see broad participation in creative approaches such as Health Enterprise Zones, which are expected to employ community health workers and others to address key causes of unacceptable health disparities.

Rebalancing health care is as important as expanding coverage. Both paths lead to the same destination of a healthier Maryland.

Dr. Joshua M. Sharfstein is secretary of the Maryland Department of Health and Mental Hygiene. His email is Dr. Laura Herrera is the department's chief medical officer. Charles Milligan is the department's deputy secretary for health care financing at the Maryland Department of Health and Mental Hygiene.