Medicare Costs Too Much, So Let's Make Private Payers Make Up the Difference

When the old system of comprehensive health care price controls fails, there can be only one solution: newer, better price controls, which will totally work this time, for sure. But when adjusting the payments, who takes the hit?

That's the problem facing health policy bureaucrats in Maryland, which has one of the most thorough sets of health care price controls in the nation. The system is known as "all-payer," in which the state's Health Services Cost Review Commission (HSCRC) sets payment rates for, you guessed it, all payers that reimburse the state's non-profit hospital system — including private insurers.

The problem, as Kaiser Health News notes, is that the state is only allowed to operate its rate setting system if it stays within certain spending targets: The average hospital cost-per-admission isn't allowed to rise more quickly than the average admission cost in the rest of the country. But the admission costs are rising fast enough that they're nearing the limit.

Conveniently, policy reformers in the state have noticed that although the state's overall average cost per admission remains lower than the rest of the country, the cost per Medicare admission is much higher. One proposed adjustment, then, would shift costs away from Medicare and onto private payers. KHN reports:

The federal government lets the state control Medicare prices only as long as the program's cost per admission rises no faster in Maryland than in the rest of the nation.

Now that the limit is close to being reached, Maryland policymakers are talking to the HHS and hospital and insurance industry leaders about sharply cutting rates for Medicare as well as those for Medicaid, which has been straining the state's budget.

But instead of making hospitals absorb the reductions, those officials are talking about forcing commercial insurers, self-insured businesses and privately insured patients to make up the difference.

Not surprisingly, folks on the losing side of the equation aren't too happy:

Critics call the proposal a tax on business that could jeopardize access to coverage and let Johns Hopkins Medicine and other hospitals avoid the kind of cost cutting that sector faces in other states.

"It brings Medicare costs down, so it gives something" to federal officials seeking price relief, said Barry Rosen, a Baltimore lawyer who works for insurers. "It sure raises the price of care to people in Maryland."

Medicare is too expensive! So let's make the private payers that don't cost as much shoulder more of the burden.