O’Malley Announces State Healthcare Reform

Governor O’Malley and Lt. Governor Brown today joined Sen. Barbara Mikulski, Sen. Ben Cardin and senior officials from the Centers for Medicare & Medicaid Services (CMS) to announce a groundbreaking new system of health care delivery that could serve as a nationwide model. The initiative to modernize Maryland’s unique all-payer rate-setting system for hospital services will improve patient health and reduce health care costs. The agreement will allow the state to adopt new policies that reduce per capita hospital expenditures and improve health outcomes as encouraged by the Affordable Care Act.

“We need to shift away from our near exclusive focus on treating illness, and move to a balanced approach that encourages prevention and wellness,” Gov. O’Malley said. “Such a shift will reduce costs for families and small businesses and will simultaneously keep many Americans from dying of preventable causes.”

“By incentivizing hospitals to improve services and reduce the costs of providing care, we’re making Maryland a better, healthier place for all of our families,” said Lt. Governor Anthony G. Brown. “By modernizing the nation’s first all-payer hospital system, we’re continuing our commitment to develop new and innovative solutions to our persistent health challenges.”

Under Maryland’s current Medicare waiver, Maryland has set its own rates for hospital services for 36 years. Maryland is the only state in the nation to operate an all-payer hospital rate setting system, under which all patients pay the same rate for services at the state’s hospitals. The new model will allow Maryland to set global budgets and other alternative approaches to payment that reward systems of care that provide improved outcomes at lower cost. Support for this new model has come from a coalition of the hospitals, the insurance companies, the state and CMS all working together with a common vision.

“Today is a great day for Maryland patients, hospitals, insurers, and tax-payers,” Senator Mikulski said. “This new initiative – developed by the state and approved by the federal government – will modernize Maryland’s unique ‘all-payer system,’ allowing our state to continue pioneering work to reduce health costs, improve quality of care, ensure access to care for all in need, and serve as a model for the nation. As someone who is so proud to have worked on developing the original waiver, today is an exciting day.”

“For nearly four decades, Maryland’s unique system has been a model for patient access, cost containment, and financial stability, providing more equitable payment levels among payers than anywhere else in the nation,” said Senator Cardin. “The revised Medicare waiver will allow us to continue our state’s commitment to increasing quality and reducing health care costs, while giving the federal government the opportunity to evaluate innovative approaches to reform.”

“Maryland’s unique approach to health care delivery has always emphasized increasing quality and reducing health care costs,” said Congressman Steny Hoyer. “The modernization of our waiver builds on that commitment, and allows Maryland to continue focusing on developing new, innovative approaches to improving patient outcomes, containing costs, and increasing both the efficiency and quality of our health care delivery system.”

Under the new model, Maryland’s hospitals have committed to achieving significant quality improvements, including reductions in hospital readmission rates and hospital acquired conditions rates. The model will limit the growth in hospital spending per capita, including inpatient and outpatient care, to growth in the state’s economy. It will also limit annual Medicare per capita hospital cost growth to a rate lower than the national annual per capita growth rate. The model is expected to save the federal government at least $330 million in Medicare spending over the next five years.

“By shifting away from traditional fee-for-service payment, Maryland’s new model encourages collaboration between hospitals and physicians to improve patient care, promotes innovative approaches to prevention, and accelerates efforts to avoid unnecessary admissions and readmissions,” said Dr. Joshua M. Sharfstein, Secretary of Maryland’s Department of Health and Mental Hygiene. “We appreciate the support of CMS for creative approaches to addressing the challenges of the health care system.”

“Today’s announcement is an encouraging step to ensure that Maryland’s unique health care delivery system can also be aligned with the goals of lowering cost and improving health outcomes for our citizens,” said CMS Administrator Marilyn Tavenner. “We hope that this can serve as an example for other states that they can work with us to achieve the shared goals of creating a more efficient health system that also delivers improved care for the American people.”

“For four decades, Maryland’s unique system of paying for hospital care, and hospitals’ partnership with state officials, the state rate setting commission, insurers, and others, has put Maryland at the forefront of innovation and equity,” said Maryland Hospital Association President & CEO Carmela Coyle. “We appreciate the Administration’s leadership in preserving this unique system for the future, and we look forward to an even closer collaboration with the state and our patients and communities as we embark upon a path that promises lower costs, higher quality, and a healthier Maryland.”

The new model will complement a number of steps Maryland has taken in recent years to improve our health care system. The State has built an electronic platform for medical records, which now connects hospitals across our state with critical patient data. In addition, the State is developing an innovative approach that links community health outreach and planning to primary care. Maryland has also created Health Enterprise Zones to address persistent health disparities in five targeted areas across the state.

For further information, visit http://dhmh.maryland.gov/SitePages/Medicare%20Waiver%20Modernization.aspx.

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