https://www.cms.gov/priorities/innovation/innovation-models/ahead
https://www.cms.gov/priorities/innovation/ahead/faqs
https://www.cms.gov/priorities/innovation/key-concepts/multi-payer-alignment
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https://www.healthcaredive.com/news/cms-tweaks-ahead-model-all-payer-states/759171/
https://www.mcknightshomecare.com/news/cms-extends-ahead-model-through-2035/
https://cthosp.org/daily-news-clip/cms-expands-ahead-model-6-things-to-know/
2023: https://nashp.org/looking-at-the-ahead-model-key-model-aspects-and-state-considerations/
(Dump - unedited)
ChatGPT said:
That is an excellent and important question, and it goes to the heart of what “all-payer” really means. The phrase can be misleading, because it does not mean that all of those programs and insurers disappear or merge into one. Rather, an all-payer model is a payment-setting regime that establishes one common schedule of rates for defined services, and then binds all payers—public and private—to pay according to that schedule for those services in the participating sector (usually acute-care hospital or sometimes hospital plus physician services).
Historically the classic example is Maryland’s hospital rate-setting program, first adopted in the 1970s under state law and later operated as a CMS demonstration. In Maryland, each hospital has a state-approved schedule of charges (now administered by the Health Services Cost Review Commission), and every payer—Medicare, Medicaid, commercial insurers, and even self-pay patients—is charged the same price for the same inpatient or outpatient service at that hospital. Medicare and Medicaid still exist as programs; they simply reimburse Maryland hospitals at the state-set rates rather than at the usual federal fee-for-service schedules. Commercial insurers likewise pay the same rates instead of their own negotiated rates.
Contemporary federal discussions of an “all-payer model” use the same concept. The CMS Innovation Center (CMMI) has tested or is considering state-based all-payer models in Vermont, Pennsylvania, and Maryland. In each case the model does not replace existing programs or carriers; it instead substitutes a uniform payment approach for a defined set of services so that hospitals (and sometimes physicians) face one price list regardless of who the patient’s insurer is. The hoped-for effects are to simplify pricing, reduce administrative costs, and make it easier to tie payment to global budgets or population-health metrics.
In a state such as California the same idea would apply: Kaiser would still exist as an integrated plan, Blue Cross would still market insurance, Medi-Cal (California Medicaid) would still operate, and Medicare beneficiaries would still be enrolled in fee-for-service or MA plans. But for services covered by the all-payer model—say, all inpatient and outpatient hospital care—the rate that Kaiser, Blue Cross, Medi-Cal, Medicare, or a self-pay patient would pay to a given hospital would be the same state-set rate. The payers continue to exist and handle eligibility, benefits, risk adjustment, and utilization management, but they lose the ability to negotiate separate prices with hospitals for those services.
Thus, “all-payer” is really about price-setting across payers for defined services, not about a single insurer or unified financing. The practical challenges lie in defining the sector (hospitals only or hospitals plus physicians), determining how to update and enforce the rates, coordinating with federal statutes so that Medicare and Medicaid can participate, and dealing with integrated delivery systems that have traditionally operated under internal transfer prices. But the conceptual core is simple: one set of rates for a class of providers, applied to all payers.
You said:
ChatGPT said:
This is a common point of confusion, because in the U.S. we are used to thinking of Medicaid as the “floor” price and commercial insurance as the “ceiling,” with Medicare in the middle. In an all-payer model the state does not simply take the Medicaid rate and apply it to everyone. Instead, the state (often with CMS approval) establishes its own schedule of rates for the participating providers — and Medicaid and Medicare agree, under a waiver, to pay those state-set rates rather than their ordinary statutory rates.
The Maryland example shows how this works in practice. For decades Maryland’s all-payer system set hospital rates that were typically above traditional Medicaid rates but below the highest commercial rates. Hospitals in Maryland could count on getting roughly the same revenue per admission from every payer. Medicaid and Medicare paid more than they would have under their usual schedules; private insurers paid less than they otherwise would have negotiated. Because all payers paid the same, no single payer was subsidizing the others, and hospitals were viable without shifting costs.
To make this legally possible, a state needs federal waivers:
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Medicare waiver: CMS agrees to pay the state-set all-payer rates for services in the participating sector (usually hospitals) instead of the national Medicare fee schedule.
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Medicaid waiver: the state is allowed to use the all-payer rate rather than the regular state plan fee-for-service schedule.
In return the state typically has to meet budget neutrality or savings tests for the federal government; for example, Maryland must keep the cumulative growth of hospital spending for Medicare beneficiaries below a specified national benchmark.
So an all-payer model is not constrained by the traditional Medicaid fee schedule. Rather, the state designs a rate structure — sometimes based on historic blended averages, sometimes on a global-budget target — and then the federal programs agree to pay that rate under a demonstration authority. Commercial payers likewise pay the same rate by state law or regulation.
If California were to adopt an all-payer hospital model, it would negotiate with CMS to let both Medicare and Medi-Cal pay the state-approved rates. Those rates would almost certainly be higher than current Medicaid rates and lower than the highest private commercial rates. The idea is to create a single, predictable, sustainable price point that supports provider solvency while reducing cost-shifting and excessive commercial prices.
The “aha” point is that all-payer does not mean everybody pays the lowest existing rate; it means the state sets a new uniform rate, and all major payers — including Medicare and Medicaid — agree to pay that rate under federal waiver authority.
You said:
ChatGPT said:
That’s a great question, because Maryland’s program is both unusual and instructive. It is the only long-running all-payer hospital payment system in the United States, and since 2014 it has operated under a modern federal-state “Total Cost of Care” model. Here is a plain-language description of how it works today.
The Basic Idea
Maryland does not have a single insurer or a single pool of funds. It still has all the familiar payers — private commercial insurers, self-insured employer plans, Medicare fee-for-service, Medicare Advantage, Medicaid, Tricare, and the uninsured.
What makes Maryland different is that for hospital services delivered in Maryland hospitals, there is one set of state-approved prices, and every payer pays those prices. Hospitals do not negotiate separate rates with each insurer. CMS, under a waiver agreement, pays Maryland hospitals the same state-approved rates for Medicare beneficiaries; the Maryland Medicaid program also pays those rates for its enrollees. Private carriers and even self-pay patients are billed at the same rates.
The State Rate-Setting Authority
Hospital payment rates are set by a state regulatory body, the Health Services Cost Review Commission (HSCRC).
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Each Maryland hospital has a regulated “charge per admission” or “charge per case” schedule approved by HSCRC.
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The schedule covers inpatient and outpatient hospital facility services (not physician professional fees).
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Hospitals may not charge payers above or below the approved rates.
From All-Payer Rates to Global Budgets
Historically Maryland regulated unit prices — the payment per admission or per service. That system kept Maryland’s hospital prices relatively stable for decades.
In 2014, Maryland and CMS redesigned the program into a “global budget revenue” model:
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Each hospital is given an annual revenue target (a global budget) based on its historical volume and adjusted for demographic and other factors.
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The hospital is expected to deliver all needed inpatient and outpatient services to its community within that budget.
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The per-service prices that the hospital charges to each payer are adjusted during the year so that, in the aggregate, the hospital collects close to its allowed budget — not more, not less.
In 2019, Maryland and CMS extended this approach into a “Total Cost of Care” model, which holds the state accountable not just for hospital costs but for the growth of overall Medicare spending for Maryland beneficiaries. The HSCRC still sets the hospital budgets, but the state also supports care-redesign and primary-care initiatives to keep patients out of the hospital.
What This Means in Practice
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A hospital in Baltimore is paid the same amount for the same inpatient stay whether the patient is covered by Medicare, Medicaid, a private employer plan, or is uninsured.
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Because the hospital’s total revenue is fixed in advance, it has no financial incentive to increase admissions or to upcode diagnoses; it benefits from preventing avoidable hospitalizations.
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Medicare and Medicaid pay more than they would under their usual national fee schedules; commercial insurers pay less than they typically pay in other states. The result is a flattened payment distribution.
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Physicians who bill professional services separately are not covered by the all-payer rates; their fees remain governed by the usual Medicare fee schedule, Medicaid rates, and private contracts.
Why It Matters
The Maryland model is often cited as proof that an American state can run a functioning all-payer system. It has:
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Eliminated most of the cross-subsidy and cost-shifting between payers.
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Given hospitals predictable revenue and shifted their incentive from maximizing volume to managing population health.
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Required ongoing negotiation with CMS to demonstrate that Maryland’s approach saves the federal government at least as much as ordinary Medicare payment methods would have.
It is still a hybrid public-private system — there is no single insurer and no single benefit design — but for the hospital facility side, there is a single, transparent price structure that binds all payers.
Key Takeaway
Maryland shows that an all-payer model can coexist with multiple payers as long as all of them agree, under federal waiver authority, to pay the same state-set hospital rates. It is not “Medicaid for all,” nor is it a single-payer system. It is a state-run price-setting regime for hospitals, backed by CMS’s willingness to let Medicare and Medicaid participate.
You said:
ChatGPT said:
Maryland’s all-payer system has deep historical roots and has been renewed several times under evolving federal waiver agreements. It is not necessarily “forever,” because it continues only as long as the federal government—primarily CMS—agrees that it meets cost and quality benchmarks.
Origins in the 1970s
Maryland first established a state hospital rate-setting commission in 1971, and by the mid-1970s all of the state’s acute-care hospitals were brought under that regime. The key national development was that in 1977 Congress allowed CMS (then HCFA) to waive normal Medicare payment rules for any state that operated an approved all-payer hospital payment system.
Maryland received such a Medicare waiver in 1977, which allowed Medicare to pay Maryland hospitals the state-set rates rather than the national Medicare fee schedules. Medicaid and commercial payers also used the same state-approved rates. This created the original Maryland all-payer hospital system.
For roughly 35 years (1977–2013) the waiver was justified by a test that Maryland’s cumulative growth in Medicare payments per hospital admission had to be lower than the national growth rate. That test was met for decades.
Shift to Global Budgets in 2014
By the early 2010s, the old test was becoming harder to meet because U.S. hospital utilization was falling, while Maryland’s payment system still rewarded volume.
In January 2014 Maryland and CMS launched a new demonstration under the CMS Innovation Center.
The 2014–2018 “All-Payer Model Agreement” replaced per-case payment with hospital-specific global budget revenue (GBR) targets and required that:
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Maryland keep the per-capita growth of all-payer hospital expenditures below a fixed target, and
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Achieve specified quality goals, such as reductions in potentially preventable readmissions and hospital-acquired conditions.
Expansion to Total Cost of Care in 2019
In January 2019, CMS and Maryland entered into the “Total Cost of Care Model Agreement,” a new waiver/demonstration scheduled to run for 2019–2028.
This agreement keeps the global hospital budgets but also holds the state accountable for the overall growth in per-beneficiary Medicare spending for all services (not just hospitals).
It also includes incentives for primary-care transformation and care coordination.
Future Outlook
The current Total Cost of Care Model is authorized through 2028.
To continue beyond that, Maryland will need to negotiate a new agreement with CMS demonstrating that the program saves the federal government money and meets quality benchmarks.
CMS retains the legal authority to withdraw the waiver if Maryland fails to meet the agreed-upon savings or quality targets. Likewise, the Maryland legislature could in theory change state law, though there is long-standing bipartisan support in the state for the model.
So, it is not permanent by statute; it is a renewable federal-state partnership.
Its longevity—nearly half a century so far—shows that it can be sustained, but it must continue to demonstrate value to both the state and the federal government.
In short: Maryland’s all-payer system began with a federal Medicare waiver in 1977, was restructured in 2014 to use global hospital budgets, and was expanded in 2019 to cover total cost of care statewide. The current agreement runs through 2028, after which its continuation will depend on a new negotiated waiver.
You said:
ChatGPT said:
That’s a thoughtful question because new technology add-on payments (NTAP) are a prominent feature of Medicare’s national inpatient payment system — and Maryland’s waiver has to deal with them in a special way.
What NTAP Is in the National System
In the regular Medicare Inpatient Prospective Payment System (IPPS), hospitals are generally paid a fixed DRG-based rate per discharge. If a hospital adopts an innovative but costly new device, biologic, or drug that is not yet built into the DRG weight, it may be eligible for a New Technology Add-On Payment (NTAP). CMS approves these add-ons for specific products for a limited period (generally two to three years) to offset a portion of the extra cost until the DRG weights are recalibrated.
Why NTAP Doesn’t Fit Cleanly in All-Payer Maryland
Maryland’s hospitals do not bill DRG rates to Medicare. Instead, each hospital operates under a global budget revenue (GBR) target approved by the state’s Health Services Cost Review Commission (HSCRC).
Hospitals are paid the same regulated rates by all payers, and those rates are adjusted during the year to keep the hospital’s total revenue near its budget.
Because of that structure there is no line-item NTAP payment flowing from Medicare to the hospital.
How Maryland Handles New Technologies
The HSCRC has had to create its own policy tools to ensure that hospitals adopting expensive new therapies are not penalized under the global budget:
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Rate Adjustments or Carve-Outs:
The HSCRC can adjust a hospital’s allowed global budget upward to recognize the costs of a new device or drug, or in some cases carve out particular high-cost drugs (such as some CAR-T cell therapies) from the budget and reimburse them on a pass-through basis. -
Coordination with CMS:
The federal waiver agreement requires Maryland to achieve specified savings for Medicare, but it gives the state flexibility in how it designs payment methods as long as it stays within those constraints. CMS does not apply its NTAP policy inside Maryland; instead it relies on the HSCRC to recognize new technologies in a way that preserves the all-payer structure. -
Timing and Data:
When CMS approves an NTAP for the rest of the country, Maryland hospitals typically petition the HSCRC for a comparable adjustment. The HSCRC then evaluates whether to incorporate the cost into hospital rates prospectively or to create a temporary add-on mechanism.
The Practical Take-Away
Maryland hospitals can still get financial support for expensive new treatments, but it comes through state-level adjustments to their global budgets, not through a separate NTAP payment from Medicare. The state’s aim is to keep the all-payer principle intact — one price structure for all payers — while not discouraging adoption of legitimate innovations.
So, if you are thinking about Maryland in comparison to the national IPPS world: NTAP is a federal add-on to DRG payment; in Maryland, the HSCRC substitutes its own budget or rate adjustments to accomplish the same goal within the all-payer framework.
You said:
ChatGPT said:
Great question — the 340B Drug Pricing Program interacts with Maryland’s all-payer hospital payment system in an unusual way because it sits outside the state’s global hospital budgets.
What 340B Is in the Rest of the Country
The federal 340B program, created in 1992 (42 U.S.C. § 256b), allows eligible safety-net hospitals and clinics to buy outpatient drugs at deep, federally mandated discounts from manufacturers.
Hospitals and clinics then bill insurers (including Medicare, Medicaid managed care, and commercial plans) at ordinary reimbursement rates, keeping the difference to support uncompensated care and other safety-net activities.
In most states this means:
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A 340B hospital buys a high-cost oncology drug for, say, $1,000 at the discounted 340B price but bills Medicare Part B or a commercial plan perhaps $2,500 for it.
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The “spread” is retained by the hospital.
Maryland’s All-Payer Model and Hospital Global Budgets
Maryland’s all-payer model covers only the hospital facility services (inpatient and outpatient) provided by regulated hospitals.
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The state’s HSCRC sets global annual revenue budgets for each hospital and adjusts unit charges so that each hospital’s total revenue hits the budget.
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Professional services (e.g., physician billing) and most outpatient drugs — especially those that might be administered in physician offices or infusion centers — are not regulated under the hospital global budgets.
How 340B Works in Maryland
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If the drug is purchased and dispensed under the hospital’s outpatient department license, it is typically inside the HSCRC-regulated revenue stream.
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The HSCRC’s global budget gives the hospital a fixed total revenue target, regardless of whether the hospital used an expensive brand-name drug or a cheaper alternative.
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The hospital still benefits from the difference between its discounted acquisition cost under 340B and the revenue it is allowed to keep under the HSCRC rates — the global budget isn’t automatically reduced because the hospital got a better acquisition price.
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If the drug is delivered in a physician office or a clinic not under the HSCRC-regulated hospital license, it is outside the hospital global budget and is billed under ordinary Medicare Part B or other payer rules, so the traditional 340B spread applies.
The key point is that Maryland’s all-payer regime does not override the federal 340B statute.
Hospitals that qualify for 340B (DSH, CAH, rural referral center, etc.) still buy outpatient drugs at the discounted price.
Operational and Policy Implications
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For hospital outpatient departments subject to global budgets, 340B savings often accrue directly to the hospital’s bottom line because the allowed all-payer revenue target is not reduced to reflect the lower acquisition price.
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For drugs used by non-hospital clinics or by independent physicians, billing follows the usual national rules and 340B operates as it does elsewhere.
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CMS’s disputes over 340B payment reductions under the national OPPS (the Supreme Court’s AHA v. Becerra 2022 decision) have not directly affected Maryland’s HSCRC-regulated hospitals, since CMS does not apply the national OPPS payment schedules there.
Bottom Line
340B in Maryland continues to function as a federal purchasing-discount program.
The all-payer global-budget system governs how much hospitals can collect in total for outpatient services, but it does not force hospitals to pass the 340B savings on to payers.
Thus, Maryland hospitals still benefit from 340B discounts, and within the global-budget framework those savings can be an important source of support for uncompensated care and for maintaining margins under the fixed revenue caps.
You said:
ChatGPT said:
You’ve put your finger on the core philosophical tension between administered pricing and a competitive market.
Maryland’s system was deliberately designed to replace market-driven price variation for hospitals with regulated, policy-driven variation, on the theory that the hospital market was failing to produce socially desirable outcomes.
That does mean some “market signals” — like the willingness of a rich-payer insurer to pay more in an expensive city or for a prestigious provider — no longer operate in the same way.
How Maryland Handles Geographic and Hospital-Specific Differences
Maryland does not literally pay every hospital the same statewide “flat” rate.
The HSCRC sets a separate global budget for each individual hospital.
That budget reflects:
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the hospital’s historical cost structure,
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its case-mix, teaching status, and other statutory adjustments,
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the wage level in its local labor market, and
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the population it serves.
So Johns Hopkins in Baltimore does not get the same per-case allowance as a small rural community hospital.
The principle is “same payer, same price at that hospital,” but the prices vary across hospitals to reflect underlying cost differences.
In that sense the system still accommodates regional cost-of-living and teaching-hospital factors — it simply does so by administrative calculation rather than by bilateral bargaining.
Provider Migration and Talent Competition
The concern that top specialists or brand-name hospitals might move to jurisdictions that pay more is real in theory.
In practice, several factors moderate that risk:
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Scope: The all-payer model in Maryland applies to the hospital facility component of inpatient and hospital-outpatient care.
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Physician professional fees, most ambulatory services, and much of specialty-drug revenue still come from the ordinary payer-specific markets, which do reflect local demand and can reward scarce talent.
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Reputation and Academic Ties: Maryland’s flagship academic centers — Johns Hopkins, University of Maryland Medical Center — have remained in the state under the all-payer regime for decades because of their brand, patient base, and research ecosystem.
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Budget Adjustments: If a hospital demonstrates a need — for example, to support a regional trauma center or to cover unusually high labor costs — the HSCRC can adjust that hospital’s global budget upward.
This functions as an administrative substitute for what a market might otherwise do via higher negotiated prices.
Effect on “Market Forces”
Economists often describe the pre-Maryland status quo as dysfunctional competition:
large price disparities among payers unrelated to actual cost differences, persistent cost-shifting, and incentives to maximize volume of profitable services rather than efficiency or quality.
The all-payer system dampens those particular market forces intentionally, substituting policy-directed signals:
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uniform hospital prices prevent hospitals from charging commercial plans two or three times what they charge Medicare,
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global budgets give hospitals an incentive to keep patients healthy rather than to increase admissions,
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state-regulated geographic adjustments substitute for the variation that private bargaining might otherwise create.
Trade-Off
The trade-off is explicit:
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You lose some of the locational and prestige-driven price differentiation that a free market allows.
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You gain price uniformity, predictability, and (in Maryland’s experience) lower overall cost growth.
Whether that’s “disrupting the market” or “fixing a broken market” depends on one’s policy perspective.
Maryland’s nearly half-century experience suggests that for hospitals, the state’s regulated approach has been able to retain leading institutions and adjust for regional cost differences without provoking large-scale provider flight.
Bottom line:
Maryland’s all-payer model suppresses the purely competitive price signal for hospital services, but it does not ignore underlying cost or geographic differences.
It replaces the market’s decentralized pricing with a state-administered schedule that still differentiates by hospital and by region, and it allows adjustments when essential providers need higher budgets to sustain access or quality.
