Hospital admissions in Maryland dropped from 7% above the national rate to 18% below it as the state implemented caps on hospital revenues, according to a new report from the Manhattan Institute published this month. The analysis examined Maryland's unique system of regulating hospital payments, which has operated for over 50 years and was extended in 2014 to fix total revenues at each facility. The report finds that while these controls reduced spending growth, they did so primarily by cutting the volume of care delivered rather than eliminating wasteful services or improving efficiency.
The data shows sharp declines across multiple measures of hospital utilization since Maryland introduced "Global Budgets" in 2014. Kidney transplant rates fell from 161% of the national average in 2012 to just 60% by 2023, according to the report. Emergency department wait times climbed from 137% to 153% of the national average between 2014 and 2023, higher than any other state. The median Maryland hospital admitted 32% fewer patients in 2024 compared with 2011, while the national median saw a 20% increase over the same period. Total hospital utilization in Maryland, after adjusting for aging and demographic shifts, declined 17% from 2013 to 2023, compared with a 6% national decrease. Meanwhile, the costs of common inpatient procedures rose 7% to 34% more in Maryland than nationwide from 2008 to 2022.
The report finds that the reduction in hospital services wasn't concentrated in low-value care. Maryland counties saw no significant changes in measures of systemic overuse following the introduction of budget caps, and the state still performs worse than the national average on two standard measures of wasteful hospital services. Author Chris Pope, a senior fellow at the Manhattan Institute, writes that the budget system "eliminates the market incentive for hospitals to attract additional patients with the best services." The report notes that making permitted revenues less responsive to the volume of essential care "encourages facilities to cut costs by withholding treatment or diverting seriously ill patients to other facilities."
Maryland's regulatory approach works by capping total revenues at each hospital, forcing facilities to adjust fees up or down to meet aggregate spending targets regardless of patient volume. The system creates the strongest incentives to restrict access to the most expensive procedures, such as transplants, because eliminating one kidney transplant surgery averaging $103,456 can fund 12 admissions for childbirth under a fixed budget. The state has traditionally supported this arrangement because it allowed Maryland hospitals to claim 37% more from the federal government for Medicare and Medicaid patients than facilities in other states. But that windfall is being phased out under a renegotiated federal waiver that will end state control of Medicare hospital rates in 2028 and eliminate overpayments by 2035. The report concludes that without the prospect of a major Medicare subsidy, the state is unlikely to remain enthusiastic about a burdensome regulatory system that pays facilities more for less care.