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As ACA repeal nears, Maryland’s hospital payment system up in the air

Carmela Coyle, CEO of the Maryland Hospital Association

Carmela Coyle, CEO of the Maryland Hospital Association.

President Donald Trump’s address to a joint session of Congress Tuesday night offered some insights into what his plan to repeal and replace the Affordable Care Act might look like, but an important aspect of any reform that would uniquely affect Maryland was nowhere to be found.

Maryland’s entire hospital payment system has derived its authority from the 2011 law, leaving the state at a particular risk as the Republican Congress and President Donald Trump move forward with repealing and replacing Obamacare.

“The Congress is now looking at tectonic change in health care,” said Carmela Coyle, president of the Maryland Hospital Association, in an interview last week, before the president’s address.

“What’s being talked about moves more than $1.2 trillion of health care spending around,” she said. “But the Maryland demonstration, we want to make certain does not get lost with these large pieces moving around.”

In Maryland, a seven-member commission sets how much hospitals get paid for their services, a system that previously required a waiver from the federal government. It is the only one of its kind in the nation.

Under the Affordable Care Act, that waiver went away. Instead, Maryland was granted demonstration authority under the ACA to continue to set rates for the hospitals, with the added requirement that Maryland had to take the process further.

That included instituting global budgets at hospitals instead of the fee-for-service system in place in the rest of the country.

If the Affordable Care Act is repealed, Maryland’s authority to continue to set rates in this way could go away.

“As the conversation around repeal of the Affordable Care Act continues, we find ourselves at risk in Maryland,” Coyle said.

The demonstration project, also known as an all-payer system, means that hospitals are given a specific budget they cannot exceed every year. This leaves hospitals with an incentive to focus on preventive care in order to keep emergency room visits down and costs lower, Coyle said.

Maryland had to meet certain benchmarks under its five-year contract with the government. Coyle said that after three years, the state’s met or exceeded all of them.

“We have exceeded all five of the metrics that we were asked to by the federal government,” she said.

That included finding $330 million in savings, a tally the state met and exceeded last year by reaching $520 million. Coyle now projects savings to reach more than $800 million over the five-year contract.

While he didn’t expect to hear anything about the demonstration authority in a national speech, Gene Ransom, CEO of MedChi, the Maryland State Medical Society, said he’s concerned about its future.

“We have a unique system, so we have unique challenges,” he said. “We need to all work together to make sure we protect the all-payer system.”

Ransom said the demonstration project has put Maryland “all in” on the Affordable Care Act and Medicaid expansion.

Other changes to health care law could also affect the system, given its reliance on Medicaid expansion. One of the biggest would be a block grant system of funding the social safety net.

“The biggest issue with block grants is what you do with states that have expanded and those that haven’t,” Ransom said.

Dr. Leana Wen, Baltimore’s health commissioner, also expressed concerns about a block grant system.

“Block grant systems make sense on paper because the way it’s framed gives greater autonomy to the states,” she said. “The problem is that autonomy comes with less funding for the states.”

Last week, before Trump’s speech, Coyle said that a lot of the proposals coming out of the Trump administration and Congress depended on how fully they were funded.

“I don’t think we should fear tax credits, block grants or per capita caps. But at the end of the day, it’s all about how adequately funded are they,” she said. “I could write a block grant I could live with. It’s not going to save the federal government a lot of money.”

And that’s a principal concern with both potential repeal and Maryland’s demonstration project specifically, Coyle said.

“I spent six years at the Congressional Budget Office,” she said. “If all Congress  is looking at is are we saving the federal budget money, that’s different than making health care affordable. And some of the things you need to do to make health care more affordable may initially contradict saving the federal budget money”

In Maryland, Coyle said the all-payer system has been successful at investing money initially to save money down the road.

Wen said 40,000 more people have gained access to health care in Baltimore because of the Affordable Care Act and she’s concerned about what could happen under a repeal.

But she said she was also concerned by what she didn’t hear the president say in his address Tuesday. One of those areas was preventive care.

Under the Affordable Care Act, Baltimore has been able to focus on preventive treatments, something that Wen fears will go away entirely under a replacement plan.

“We’re really focusing on prevention and what keeps people healthy,” she said. “We should be trying to prevent people from getting ill in the first place.”

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