For more than a decade, Maryland has occupied a rare place in American healthcare as a proving ground for reform, going beyond mere participation.
The state’s all-payer model, built on hospital global budgets and standardized pricing, was designed to answer a question that has long eluded policymakers: Can the cost of care be controlled without compromising outcomes?
In narrow terms, the answer appeared to be yes. The model reduced hospital utilization, improved readmissions and met federal savings benchmarks. It demonstrated that, with the right financial constraints, hospitals could be nudged away from volume and toward efficiency.
But beneath those gains lies a more complicated reality, one that raises a deeper question: whether controlling hospital spending is enough to improve the health of the people who depend on it.
Maryland’s approach has become one of the most closely watched experiments in value-based care, testing whether financial discipline alone can reshape outcomes, or whether something more fundamental is required, as Amit Jain, MD, chief of minimally invasive spine surgery and director of value-based care at Baltimore-based Johns Hopkins Medicine argues in a recent analysis.
A success — depending on how you measure it
By federal standards, Maryland’s Total Cost of Care model succeeded. It generated savings relative to projections set by the Centers for Medicare and Medicaid Innovation and reduced avoidable hospital use.
Those results come with an important caveat, Dr. Jain told Becker’s.
“The model achieved savings compared to the benchmark CMS set,” he said. “But in reality, those weren’t true dollars saved.”
Under Maryland’s unique federal waiver, Medicare pays hospitals in the state higher rates than it does elsewhere, effectively subsidizing the system. In other words, the model met its targets while still relying on elevated federal spending, creating a tension between policy success and fiscal reality.
It is a distinction that has divided observers: a model that works on paper, but raises harder questions in practice.
The missing driver of change
At its core, the model was designed around hospitals. Global budgets removed incentives tied to volume and succeeded in reducing unnecessary admissions. But the clinicians responsible for diagnosing disease, managing chronic conditions and shaping everyday care decisions remained largely outside the model’s financial structure.
“Clinicians are the engine through which value-based care needs to be driven forward,” Dr. Jain said.
Instead, Maryland created a system with competing incentives: hospitals were rewarded for limiting utilization, while many physicians continued to operate in fee-for-service. “On the hospital side, you have a capped budget, so the hospital doesn’t necessarily incentivize you to do more volume, but on the ambulatory side, you’re still pro-fee based,” he said. “That creates access issues and other kinds of downstream impacts.”
Care did not disappear; it shifted. As inpatient volumes declined, more services moved into outpatient settings, where spending is less regulated, a dynamic that helped offset some of the hospital savings.
Efficiency without transformation
The model proved it could reduce waste. It did far less to change the trajectory of disease.
Chronic conditions such as diabetes, hypertension and obesity, remained largely unaffected. The system became more efficient, but not fundamentally healthier.
Dr. Jain said that many of the “easy pickings” in reducing utilization have already been taken care of, and that moving forward will require being “forward thinking” about how to improve access, leverage new tools like AI and drive quality.
That distinction, between reducing utilization and improving population health, has become central to how the model is now understood.
The paradox of stability
One of the model’s defining features, stable hospital revenue, was intended to create space for innovation. In practice, it has often done the opposite.
Hospitals, operating under fixed budgets, are effectively constrained to reduce costs without the ability to grow revenue, limiting their capacity to invest in innovations like AI, Dr. Jain said. Over time, that constraint has contributed to capacity challenges, including limited room for growth and persistent access issues in some settings.
At the same time, structural barriers facing physicians have compounded the problem. “It’s very challenging to recruit physicians to Maryland because physician pay is among the lowest in the country,” Dr. Jain said. “And it’s very hard to start a business because of regulations like certificate-of-need laws, which require you to prove there’s a need before opening something new.”
Low reimbursement, restrictive noncompete agreements and regulatory hurdles have limited physician mobility and competition, narrowing the pathways for alternative models of care to emerge.
Where the money goes
Even as hospital costs were constrained, Dr. Jain said the financial effects of the model have not been evenly distributed across the system.
He pointed to commercial insurers, which pay lower hospital rates under Maryland’s all-payer structure but have not consistently reduced premiums for patients. At the same time, he noted that programs designed to engage physicians in value-based care remain relatively small, with incentives that are modest compared to traditional fee-for-service revenue.
A question of who leads
If Maryland’s experience reveals a central lesson, it may be that payment reform alone is not enough, who leads the system matters as much as how it is financed. Across the country, physician-led models have often outperformed hospital-led efforts in reducing costs and improving outcomes.
“What has really succeeded are physician-led accountable care organizations, or models where physicians have a skin in the game and can drive clinical care improvement,” Dr. Jain said. “They can drive clinical integration and innovate in a way that’s very valuable for the patient — they can drive quality, reduce cost and reduce heterogeneity in care delivery.” Without that level of alignment, the model addressed utilization, but left many of the underlying drivers of health unchanged.
The next experiment
Maryland is now entering its next phase, known as the Achieving Healthcare Efficiency through Accountable Design model, an effort to expand cost control while refining how care is delivered.
For Dr. Jain, the opportunity lies in shifting the focus from constraint to incentive. “The spirit of any value-based program is really good, but it’s the details that really drive outcomes,” he said.
The next iteration, he argues, should reward improvements in quality, not simply cap spending. “My hypothesis is if you drive the top of the equation, which is the quality side, then cost will go down. I think, unfortunately, what has happened in the Maryland model, is we’re focused on cost reduction by capping the net costs,” Dr. Jain said. “We had hoped that would drive quality up, but the results don’t necessarily prove that.
In practice, that shift would require giving clinicians more direct responsibility, and more resources, to manage patient populations, invest in prevention and redesign care delivery.
Beyond Maryland
The implications extend far beyond a single state. Federal policymakers increasingly view models like Maryland’s as a potential blueprint for national reform, a pathway for shifting the U.S. healthcare system away from volume and toward value.
“CMS actually views this as their roadmap for the nation,” Dr. Jain said.
Whether that roadmap ultimately leads to better health, not just lower utilization, remains an open question.
For now, Maryland offers something more nuanced than a success story or a failure. It offers a case study in the limits of financial reform alone, and a reminder that transforming healthcare requires not just new incentives, but new leadership at the point of care.
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