With the 2026 Legislative Session approaching, MACo is profiling major issues, including hospital rate setting in Maryland, that are likely to receive significant attention.
Maryland has long stood apart in how it pays for and provides health care. Its unique all-payer system for setting hospital rates, improved through the state’s Total Cost of Care model, has kept costs down, led to better results, and garnered national attention as a model to follow.As previously covered by MACo, since the 1970s, Maryland has operated under a unique arrangement through the Health Services Cost Review Commission (HSCRC), the only system in the nation in which a state, not the federal government, sets hospital rates. Under this model, all payers, including Medicare, Medicaid, commercial insurers, and even self-insured employers, pay the same rates for the same hospital services.
On November 1, 2024, Maryland and the federal Centers for Medicare and Medicaid Services (CMS) entered into an agreement for the State to participate in the successor to TCOC, the State’s Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model. In May 2025, under a new administration, CMS signaled its interest in altering the agreement, specifically with respect to the ability of the State to set rates for Medicare services. Negotiations between CMS and Maryland continue, though the Maryland Department of Health (MDH) and HSCRC anticipate that the renegotiated terms will allow the federal government, rather than the State, to set Medicare rates beginning in 2028, with a transition to full CMS authority to set Medicare rates in 2031. The renegotiated federal Achieving Healthcare Efficiency through Accountable Design (AHEAD) Model, which maintains the same acronym while altering the name of the model, would allow Maryland to continue statewide efforts to improve health care quality and control costs. Broadly, AHEAD seeks to improve the total health of the State population and lower costs across all payers.
As previously covered by MACo, if Maryland’s Health Services Cost Review Commission (HSCRC) authority is reduced or eliminated under the AHEAD amendment, hospitals may begin negotiating prices directly with insurers and employers, similar to systems in other states. Large insurers could leverage their size, but self-insured employers, including counties, could face higher costs and fewer protections against price variability.
Commercial insurance rates could spike in 2028, with cascading effects on county budgets and employee health plans. Hospitals in rural counties or communities with underserved populations, which already operate on thin margins, could face additional strain.
From the Issue Papers, page 107 of the pdf:
On September 23, 2025, Governor Wes Moore announced the creation of a regulatory working group led by the Secretary of Health to address issues that arise from the implementation of the AHEAD Model as well as the federal One Big Beautiful Bill Act (H.R. 1), particularly cost-shifting, stabilization of the Medicare Advantage market, and other multi-agency priorities. The working group includes representatives from MDH, HSCRC, the Maryland Insurance Administration, the Maryland Health Care Commission, and the Maryland Health Benefit Exchange, and will submit an initial plan in late 2025 with a final report due in June 2026.
One of the regulatory working group’s recommendations for cost-shifting raises potential concern for counties. In outlining a framework to achieve the State’s AHEAD savings targets, the proposal would shift substantial costs to commercial health plans, likely with ripple effects on county budgets and employee benefit plans.
Counties employ thousands of workers and provide health coverage to families throughout the state. The cumulative effects of these federal and state policy changes could translate into higher health plan costs for counties, heightened budgetary pressure, and added challenges in maintaining affordable, comprehensive benefits for employees.
