Katie Wunderlich, Executive Director of the Maryland Health Services Cost Review Commission (HSCRC), warned commissioners during a meeting Wednesday that the state’s total cost of care growth as of April 2022 was 3.68%—more than 3% higher than the national average of 0.29%.
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In 2019, Maryland began its Total Cost of Care Model (TCOC), setting a per capita limit on Medicare total cost of care in the state. Developed as a waiver through the Center for Medicare and Medicaid Innovation (CMMI), the model aims to save $300 million in annual total Medicare spending by the end of 2023 by requiring that all payers (such as Medicare, Medicaid, and commercial insurance companies) pay the same rate for hospital services at the same hospital. However, hospital cost growth per capita for all payers must not exceed 3.58% per year—a benchmark the model is not meeting based on its year-to-date comparison to April of last year.
Wunderlich advised caution when interpreting the data. With only first-quarter data collected as of this year, the cost growth measurements may change in the coming months. She also noted that the TCOC model has never been out of line with its guardrail goals to this scale.
“If this were to hold, and we were to end the year at 3.38% total cost of care growth above the national growth, that would also wipe out the majority of our annual total cost of care savings that have been approved to date,” Wunderlich said. “So we obviously are taking this very seriously. We’re looking at it very closely and working with our federal partners to prepare for that difference.”
In its first year of operation, the model saw widespread success. A 2021 performance assessment by HSCRC found that the model’s 2019 results surpassed all of its benchmarks. All-payer growth was limited to 2.58%, and Medicare total cost of care savings per beneficiary were nearly triple its initial target.
A possible explanation for this year’s cost growth discrepancy, Wunderlich explained, was that the national data was incorrect or inconsistent. Wunderlich said the commission is working with federal partners to further validate the national cost growth figure. She cited a recent health spending brief from health research organization Altarum, which does show a 0.2% year-to-year price growth.
“According to Altarum, that 2 tenths of a percent growth is consistent, which is good in terms of understanding that perhaps our data is correct,” Wunderlich said. “It is bad because our data is correct, but we show a very wide noncompliance [with the national average].”
Another factor for Maryland’s higher cost growth is the state’s higher hospital growth compared to the rest of the nation. According to Wunderlich, Maryland’s annual in-patient and out-patient hospital growth is currently 5%, compared to the national average of just 1.46%.
Although the commission will continue to monitor Maryland’s total cost of care growth as more data becomes available, Wunderlich said they are alerting CMMI of the ongoing discrepancy.