Maryland's Hospital Global Budgets

Maryland is the only state where one regulator sets hospital rates for every payer, an arrangement dating to the 1970s. That foundation made possible the boldest state-level test of the global budget idea covered in Module 2.

The model

Element	Detail
Name and period	Maryland All-Payer Model, 2014 through 2018
Core mechanic	Each hospital’s total annual revenue fixed in advance, across Medicare, Medicaid, and commercial payers
Targets	Limit all-payer hospital cost growth; save Medicare at least $330 million over five years
Evaluator	RTI International, under contract to CMS

With revenue fixed, an admission stopped being income and an empty bed stopped being a loss. The federal evaluation documented how hospitals responded: investments in care coordination, discharge planning, social work staffing, and patient care transition programs.

What the evaluation found

• Total Medicare spending for Maryland beneficiaries grew 2.8 percent slower than in a matched comparison group, roughly $975 million in Medicare savings over the model period.
• The savings were driven by 4.1 percent slower growth in Medicare hospital spending, with especially slow growth in emergency department and outpatient hospital spending.
• The result far exceeded the model’s $330 million savings target.

Worth remembering: total savings ($975 million) were smaller than hospital savings alone, because some care and cost shifted to settings outside the hospital budget. That gap is why Maryland’s follow-on model expanded accountability to the total cost of care.

What came next

In 2019 Maryland moved to the Total Cost of Care Model, which holds the state accountable for all Medicare spending, not just hospital spending. CMS has since built a multi-state model (AHEAD) on the same chassis, making Maryland’s experiment the template for state-level accountability.

What to take from it

Maryland is the strongest American evidence that fixed hospital budgets can slow spending growth without wrecking hospitals. It is also a caution about generalizing: the state had a unique forty-year-old rate-setting infrastructure that no other state starts with, and cost-shifting to unbudgeted settings appeared exactly where the incentive design predicted it would.

Sources

• Evaluation of the Maryland All-Payer Model: Final Report (RTI International, for CMS) (opens in a new tab)
• RTI summary of the final evaluation findings (opens in a new tab)