President Obama’s health care reform bill is filled with experiments on how to hold down health care costs. There will be bundled payments for episodes of care and extra payments for raising quality standards. It calls for the reorganization of hospitals and physician practices into “accountable care organizations,” which will share in savings if their costs fall below previous levels.
What’s not in the legislation is old-fashioned hospital rate regulation, which only one state in the nation uses. The latest results from Maryland suggest rate regulation works.
The state’s Health Services Cost Review Commission (HSCRC) announced earlier this week that average costs per stay at Maryland’s 51 hospitals rose just 2 percent in 2010, significantly less than the 3 percent national average. Since 1977, when rate regulation went into effect, hospitals costs in Maryland have experienced the lowest cumulative growth rate of any state in the nation, going from 26 percent above the national average to almost exactly average, according to data contained in HSCRC’s latest annual report .
Maryland, which had the sixth highest hospitalization costs among 50 states and the District of Columbia in the mid-1970s, today ranks squarely in the middle of the pack. Its $10,983 in average costs per equivalent admission in 2010 was slightly less than the $10,996 national average.
