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All-Payer Healthcare: What it is and Who Uses it

Sikich

Oct 3 2018

3 min read

As states experiment with a modified all-payer healthcare system, taxpayers and hospitals in those areas should consider how it will affect them.

The Foundation of All-Payer Healthcare

With an all-payer healthcare system, patients and insurance companies are billed an amount established by state officials, and hospitals are paid a flat rate. This system works to ensure that all patients are charged the same amount for the same treatment or service and to lessen the burden of healthcare expenses. It also guarantees a set annual revenue for hospitals. In the 1970s and 80s, a number of states implemented this pricing system; however, this was quickly repealed across the country. Currently, Maryland is the only U.S. state to still use this healthcare system.

All-Payer Healthcare Today

A couple of states are revisiting all-payer healthcare to make changes that better meet their residents’ needs. Pennsylvania and Vermont have adopted versions of all-payer healthcare within the last two years, with a primary objective of addressing the total cost of care. Pennsylvania’s model was established to help increase their rural citizens’ access to high-quality care and the rural hospitals’ financial well-beings. Under this system, hospitals receive a monthly flat rate based on all-payer global budgets and are required to provide quality of care in their local communities. Vermont, similarly, implemented an all-payer accountable care organization model involving Medicare, Medicaid, and commercial healthcare payers with aims to improve healthcare value and quality.

Qualifications

Hospitals in Pennsylvania can qualify for this program if they are either a critical access or acute care hospital in a rural area (payers in the state, such as Medicaid and commercial plans, are also eligible). All physicians and clinicians in Vermont are eligible to participate.

Funding

For now, both states are receiving funding for the projects through the Centers for Medicare & Medicaid Services (CMS). However, at the root of all-payer healthcare, is a payment method through which hospitals are paid with taxes and premiums from individuals and businesses.

It should be noted that at the inception of Maryland’s all-payer healthcare system, their hospitals’ admissions cost was above the national average. Over time this dropped, and Maryland’s rate is now the lowest in the country.

Conclusion

The pilot programs in Pennsylvania and Vermont continue, while Maryland also experiments with adjustments and improvements to their system. As this program is still in the early stages and only being tested by a few states, hospitals and taxpayers across the country may have many questions. To understand how this could affect you, contact our tax experts at Sikich.

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About the Author

Sikich

Sikich is a global company specializing in technology-enabled professional services. With more than 1,900 employees, Sikich draws on a diverse portfolio of technology solutions to deliver transformative digital strategies and is comprised of one of the largest CPA firms in the United States. From corporations and not-for-profits to state and local governments and federal agencies, Sikich clients utilize a broad spectrum of services* and products to help them improve performance and achieve long-term, strategic goals. *Securities offered through Sikich Corporate Finance LLC, member FINRA/SIPC. Investment advisory services offered through Sikich Financial, an SEC Registered Investment Advisor. 