Impacts of Maryland's global budgets on Medicare and commercial spending and utilization

Abstract

In 2014, Maryland incorporated global budgets into its long-running all-payer rate-setting model for hospitals in order to improve health, increase health care quality, and reduce spending. We used difference-in-differences models to estimate changes in Medicare and commercial insurance utilization and spending in Maryland relative to a hospital-based comparison group. We found slower growth in Medicare hospital spending in Maryland than in the comparison group 4.5 years after model implementation and for commercial plan members after 4 years. We identified reductions in Maryland Medicare admissions but no changes for commercial plan members, although their inpatient spending declined. Relative declines in emergency department and other hospital outpatient spending in Maryland drove slower Medicare hospital spending growth, saving $796 million. Our findings suggest global budgets reduce hospital spending and utilization but aligning incentives between hospital and nonhospital providers may be necessary to further reduce utilization and total spending.