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“Bending the cost curve”- Taking a lesson from Annapolis

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Eli Y. Adashi, a physician, a professor of medical science and the outgoing dean of medicine and biological sciences at Brown University, writes in today’s Washington Post that the nation – not to mention, each state – could take a lesson from Maryland on “bending the cost curve” of health care.

Overseen by expert commissioners appointed by the governor, the modestly staffed HSCRC [Health Services Cost Review Commission] is an independent agency whose decisions are legally binding. The results are plain: Maryland residents receive hospital care regardless of ability to pay, but the state’s hospital costs per admission dropped from 26 percent above the national average in 1976 to well below that national benchmark by the early 1980s. Costs per admission are controlled, and the annual admission growth rate (1 percent) is on a par with the national rate, according to an analysis by executive director Robert Murray of hospital reports filed with the agency through 2008.

Over three decades, the HSCRC (current annual budget: about $4.9 million) is estimated to have reduced state health-care bills by as much as $40 billion, a return on investment of about 2,500 to 1. Had a comparable national system been created to the same effect, the commensurate savings might have been $1.8 trillion.

Maryland’s health-care market is largely free of dysfunctional (and discriminatory) hospital practices seen in many other states, such as indefensible cost markups and cost-shifting to patients. Building on its strong record, the HSCRC voted this year to approve an innovative pay-for-performance program focused on potentially preventable hospital-acquired complications and readmissions.

Consider the ingredients of Maryland’s success: Foremost is the HSCRC’s legislated independence and broad enforcement authority. Nonpartisan and apolitical, the commission is not an advisory committee but is empowered to act on its findings. Analysis and deliberation are public, collaborative and exhaustive. No less important is the broad support afforded the commission by stakeholders in the system: providers, payers, patients and politicians (who still recall the oceans of red ink generated by Maryland’s charity hospitals). Health-care providers appreciate the predictability, transparency and fairness of the process, and the nationally comparable profit margins. The enhanced compensation by public payers (enabled by a federal waiver) and the absence of protracted rate negotiations with each payer are fringe benefits. Payers cherish the regulated payment parity and the predictability of revenue streams. They are also happy to be largely free of hospital cost markups and cost-shifting. Patients appreciate the access to care. Moreover, employer-sponsored premiums as a percentage of median household income are the lowest in the nation, the New America Foundation’s “State of State Health” reports.

Just changing health insurance regulations – and most importantly eliminating health insurance companies from their current anti-trust exemption – is not enough to really bend the curve of health care costs. Limiting payments to doctors and medical providers won’t do much either, except to drive more out of the market or cause them to find other ways to increase their income. What must be done is changing the system as a whole. Maryland’s example may provide an example of how that can be done.


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