Senate Health and Welfare weighs reference‑based pricing and global budgets after Milbank briefing on Maryland model

The Senate Health and Welfare committee met Friday, Feb. 21 to discuss Part 4 of its committee bill on hospital budgets and payment reform, focusing on reference‑based pricing, total cost‑of‑care targets and the possible use of global hospital budgets. Green Mountain Care Board member Dave Mermin and John Colmers, chair of the Milbank Fund, gave the committee technical and comparative perspectives on implementation and timing.

Mermin, who identified himself as a board member of the Green Mountain Care Board but said he was speaking for himself, described reference‑based pricing as “a method to standardize prices paid for health care services” that uses Medicare as a base and then applies a multiple. He told senators reference‑based pricing addresses “price differentials between institutions” and can target high‑margin services such as CT and MRI imaging. Mermin asked the committee to add implementation timelines to the draft statutory language, noting work on stakeholder engagement, rulemaking and staff resources would be needed and could take multiple years to complete.

Colmers gave a longer briefing on Maryland’s experience operating an all‑payer, rate‑setting system under the Health Services Cost Review Commission (HSCRC). He summarized HSCRC’s evolution from 1970s unit rate setting to per‑case payments, and later to a global budget and total cost‑of‑care framework. He described key elements Maryland uses: an independent rate‑setting commission, a statewide health information exchange (CRISP), a primary care alignment program (MDPCP), and a federal contract with the Center for Medicare & Medicaid Innovation (CMMI) to extend the model (referred to in testimony as the AHEAD contract).

Colmers said Maryland’s model is not capitated payment but a fee‑for‑service market with a global budget cap, and he argued that feature provided stability during COVID‑19: “As volume fell, revenue remained the same,” he said, which protected hospitals when elective volumes declined. He also reported that, under Maryland’s total‑cost efforts, the state has produced “about a billion dollars in savings above and beyond what Medicare required us to produce,” while cautioning that complexity, physician alignment and emergency department wait times remain persistent challenges.

Committee members raised timing and scope questions. Several senators said health care cost reform has immediate ripple effects on education finance and on the 2026 budget cycle; one senator urged balancing urgency with careful planning. Mermin and Colmers both recommended building statutory authority early but phasing implementation so that reference pricing, budgeting and regulatory duties can be tested and adjusted. Mermin noted the draft bill sometimes refers to starting in 2026 but the committee should clarify whether that means calendar year 2026 or fiscal year 2026 and consider pushing some dates to 2027 to allow rulemaking and plan development.

No formal votes were recorded during the session. Committee leaders asked witnesses to provide written comments and timing suggestions to help refine statutory language before further drafting.

The committee recessed to hear additional testimony later in the agenda.