Equalizing Health Provider Rates: All-Payer Rate Setting
Updated February 2014
The following NCSL Issue brief was distributed to legislators and legislative staff across the country.
Equalizing Health Provider Rates: All-Payer Rate Setting #7 - PDF File (To read portable document format (.pdf) files, use Adobe Acrobat Reader.)
Cost Containment Strategy and Logic
All-payer rates are payment rates that are the same for all patients who receive the same service or treatment from the same provider. “All payers” include private health insurance plans, large employer self-insured plans, uninsured patients (where data are available), and Medicaid and Medicare (under an approved waiver from the federal government). Rates may be set per service or per case (e.g., hospital care for a heart attack). Rate setting has mainly been used for hospital inpatient and outpatient services. Under a system of all-payer rates, the reimbursement a provider receives for a given service is the same regardless of who pays. Different payers would not pay different rates for the same service, as is the case today. Currently, although virtually all patients are charged the same amount on paper (i.e., list price), actual payments vary widely based on negotiated discounts. A hospital, for example, may receive reimbursements from more than a dozen different health insurers and health plans, each with its own payment schedule. In addition, Medicare and Medicaid have their own rules for paying hospitals.
Summary of Health Cost Containment and Efficiency Strategies - Brief #7- Equalizing Health Provider Rates: All-Payer Rate Setting
|State/Private Sector Examples
|| Strategy Description
||Target of Cost Containment
||Evidence of Effect on Costs
||Payment rates that are the same for all patients receiving the same service or treatment from the same provider. Rates can be set by a state authority or by providers themselves.
- High health care prices.
- Lack of price competition.
- Significant provider costs to negotiate, track and process claims under multiple reimbursement schedules.
|Evidence is mixed but indicates that, properly structured, state all-payer rate setting can slow price increases but not necessarily overall cost growth.
Recent News and Updates
Modernizing Maryland's all-payer rate-setting system Approved: On January 10, 2014, CMS announced its approval of the proposal to Modernize Maryland's all-payer system. For more information, visit: http://innovation.cms.gov/initatives/Maryland-All-Payer-Model/
Background: Maryland is the only state with an all-payer system of hospital finance, which is overseen by the Health Services Cost Review Commission (HSCRC). Maryland is pursuing efforts to modernize this system to enhance patient experience, improve outcomes, and lower health care costs. This requires a model proposal to be accepted by the Center for Medicare and Medicare Services (CMS) in the U.S. Department of Health and Human Services.
On October 11, 2013, Governor Martin O’Malley submitted a proposal to modernize Maryland’s all-payer hospital system. Read the proposal here. Read the state’s revised model proposal here.
Maryland's Proposal to Modernize All-Payer Rate Setting: - Maryland Executive branch testimony describing next-step plans. Maryland will accelerate a broad range of delivery reform efforts. These include modernizing Maryland's All-Payer Rate Setting System– 03/27/2013.
About this NCSL project
NCSL’s Health Cost Containment and Efficiency Series will describe two dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher (2009-2011).
NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado