Dive Brief:
- This week, the Obama administration should announce a healthcare experiment testing out the effects of aggressive government regulation of medical prices. The hope is that such intervention can dramatically cut healthcare spending.
- The plan, which has been under negotiation for a year, would cut $330 million in federal spending for Maryland, a move which would leave it looking more like Germany and Switzerland.
- Since 1970, Maryland has been the only state to set prices hospitals charge patients, an approach researchers estimate has saved $45 billion for consumers over the last four decades. The new plan, which was approved by CMS on Friday, would call for continued rate-setting, but also put in a cap on all hospital spending, limiting hospital spending growth to 3.58% for the next five years.
Dive Insight:
At first blush, setting rates for hospitals might seem like a recipe for disaster. After all, it gives them a very strong incentive to skimp on patients' care. But Maryland has also promised to monitor key quality metrics, such as reducing hospital re-admissions and cutting the rate of hospital-acquired infections, in part to make sure that hospitals aren't cutting back due to the rate-setting requirement. I say that if Maryland hospitals have managed under a budget for almost 40 years, and the state has saved billions of dollars, taking the next step just makes sense. Any model that stands a chance of containing cost increases without hurting patients deserves a try.