How health care price fixing works in Maryland

As part of her series in National Journal, Margot Sanger-Katz explains how four decades of health care price controls have held costs in Maryland from 25 percent above the national average in 1976 to 3 percent below average in 2009.

national journalIn addition to price, the state’s system has also had an impact on quality of care and on hospital access, because Maryland’s universal prices mean that inner-city hospitals won’t be lured out to more affluent suburbs as they have been in cities such as Detroit and St. Louis.

Maryland’s system is what health care economists call all-payer rate-setting. The cost-containment board looks at services and hospital needs and then selects a uniform menu of prices for all payers. In most states, prices for the same procedure vary. Some payers, usually the public ones such as Medicaid, get a steep discount, while others pay more to make up the difference. (The country’s most expensive CT scan of the head is $1,545, according to the international health-plan study.) In Maryland, Medicare, Medicaid, private insurers, and patients who pay cash all get the same bill for a CT scan. It means that bigger, more powerful hospitals can’t demand higher prices from insurers. It also means that hospitals that treat Medicaid patients don’t get bankrupted by skimpy reimbursement rates.

Sanger-Katz is writing this series as part of an AHCJ Media Fellowship on Health Performance, supported by the Commonwealth Fund.

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