October 24, 2014

Maryland, Massachusetts Try to Rein In Health Costs

  • The American health care system is a patchwork of public and private programs that serve citizens in different ways, depending on their age, military...

Officials in Maryland and Massachusetts are pursuing ambitious reforms to limit health spending to their states’ economic growth rates. These reforms could provide useful lessons for the rest of the country.

In Maryland, state hospitals and insurers have agreed to enter into new payment arrangements that over the next five years will limit the growth in hospital spending to 3.58 percent a year. That is the state’s average annual rate of per capita economic growth since 2002.

In Massachusetts, a 2012 law aims to limit the growth in state health expenditures over the next 10 years to the state’s economic growth rate. A 2006 Massachusetts law served as a model for the federal Affordable Care Act; the new state legislation creates a commission to work with payers and providers to help keep health spending on track.

These reforms could save both states significant amounts of money in coming years. If successful, they could also help guide officials in other states and Washington as they continue working on their own cost-containment initiatives.