In 1971, the state of Maryland established the Health Services Cost Review Commission (HSCRC) to regulate the rates that hospitals in the state could receive from Medicare, Medicaid, and private insurers. Although other states once regulated hospital rates, only in Maryland does the practice continue. In this Commentary, we describe the Maryland system, discuss why regulation in other states failed, and suggest that other states should consider regulating hospital rates.
Several problems led to the creation of the HSCRC. Hospital costs per admission were significantly higher in Maryland than the average in other states and were increasing more rapidly each year, some hospitals were losing increasing amounts of money caring for uninsured patients, and several Maryland hospitals were denying care to patients with little or no health insurance.1- 2 The legislation creating the HSCRC gave it the power to set rates prospectively each year that all insurers would pay to the acute care hospitals in the state, making Maryland, in the local idiom, an “all-payer state.” A federal waiver transferred hospital rate control over Medicare and Medicaid recipients to the HSCRC.