“The CMS [Centers for Medicare and Medicaid Services] Innovation Center tests different approaches to health care payment and service delivery to maximize provider performance and improve quality of care and patient outcomes. One approach to achieve these goals is through “state total cost of care” pilot programs, in which a state takes responsibility for the health and costs of all residents. Recently, CMS has partnered with states to take accountability for the ‘total cost of care,’ which includes inpatient, outpatient, and other types of services.
“As its name suggests, when a state partners with CMS by taking on accountability for the total cost of care, the state uses its authority to assume responsibility for managing the health care costs across all payers, including Medicare, Medicaid, and private coverage. States also assume responsibility for ensuring health providers in their state deliver high quality care, improve population health, and offer greater care coordination.
“CMS supports states in implementing these pilot programs by providing start-up funding that supports state infrastructure, as well as activities that can help improve quality and population health outcomes. CMS also supports states by offering tools to manage costs, and waivers to help providers transform their care.
“States participating in a total cost of care pilot program can apply different strategies to achieve two primary goals: improving the health of their resident population and reducing avoidable health care related costs. Strategies can include investing in advanced primary care or working with hospitals to improve care through hospital global budgets. As a result, primary care providers and hospitals can help patients better manage their health conditions, reducing the likelihood of an unnecessary or prolonged stays in a hospital or rehabilitation facility.”
Source: US Centers for Medicare and Medicaid Services, Total Cost of Care and Hospital Global Budgets, Accessed July 4, 2026.
“In CMS Innovation Center pilot programs, hospitals that receive a global budget are paid a prospective, predetermined amount based on their historical Medicare and Medicaid spending, with annual updates to account for population changes and inflation. The frequency of these budgetary payments, and the methodology by which they are calculated may vary depending on the type of model being applied. Global budgets can benefit hospitals by removing the uncertainty that often characterizes fee-for service (FFS) payment systems. Under FFS, hospitals and other care providers receive payment for services provided, which can lead to pressures to provide additional services to justify billing. This can lead to a decline in revenue when utilization drops, similar to what was experienced during the COVID-19 public health emergency.
“The global budget process allows hospitals to proactively plan – building out strategies that improve their standards of care and improve the health outcomes of their patients. Hospitals operating under a global budget that successfully deliver coordinated care and collaborate more closely with community partners to improve health outcomes may earn bonuses for delivering higher quality care and cost management.
“Hospital global budgets can offer all hospitals, including rural and safety net hospitals, funding needed to invest in health promotion and disease prevention programs. Global budgets can modernize hospital tools and facilities, and support strategies that provide high-quality care to patients. This payment approach offers stability for hospital systems during unpredictable times. In states like Maryland, where these strategies are currently being implemented under the Maryland Total Cost of Care Model, the state was better positioned to remain constant in both costs and delivery of care during the COVID-19 public health emergency.”
Source: US Centers for Medicare and Medicaid Services, Total Cost of Care and Hospital Global Budgets, Accessed July 4, 2026.
“Over the first four years of the MD TCOC [Maryland Total Cost of Care] period (2019 to 2022), the model decreased total Medicare Part A and B spending by an average of $292 per beneficiary per year or 2.1% (90% confidence interval: [$451, $133]) (Exhibit ES.3). These effects were about 1.0 percentage point larger during the MD TCOC period than they were at the end of the MDAPM period (2017 to 2018).
“The model reduced total spending by reducing hospital spending (6.1%) by more than it increased non-hospital spending (3.1%). After accounting for non-claims payments for MDPCP and other delivery reforms in Maryland and the comparison group, the model generated an estimated $689 million in net savings to Medicare over its first three years (2019 to 2021).3 The model reduced total spending largely because, for many years (from 2014 to 2019), HSCRC [Maryland Health Services Cost Review Commission] set the growth of total hospital spending in the state below the growth of hospital spending nationally. HSCRC did this mainly to meet savings requirements built into the agreements with CMS establishing the model. The hospital global budgets have encouraged hospitals to shift some care to non-hospital settings, such as sending some surgeries to ambulatory surgical centers, which have increased spending in nonhospital settings. The savings on hospital spending, however, have exceeded the increases in nonhospital spending, generating the overall Medicare savings.”
Source: Greg Peterson, Jason Rotter, Rachel Machta, Keri Calkins, Katie Morrison Lee, Amanda Markovitz, Rumin Sarwar, Kate Stewart, Jake Vogler, Isabel Platt, Danielle Whicher, Nancy McCall. Evaluation of the Maryland Total Cost of Care Model: Progress Report. Mathematica. April, 2024.
“Maryland has a rather unique hospital reimbursement history, starting with all-payer rate setting in the 1970s, then the All-Payer Model with a global budget program initiated in 2014, which was updated in 2019 to the Total Cost of Care Model.2 The state has developed an advanced financial data infrastructure and its own revenue definitions categorized into “rate centers” that map to Uniform Billing 04 revenue codes.3 Despite regulations, hospitals charge different rates per unit even within the same rate center. The authors have standardized the rate per unit charged across the state; however, it remains unclear if different hospital charge masters are mapped to the same rate centers/UB-04 revenue codes, with only vague definitions in their accounting and budget manual (section 200).4 The lack of standardization of mapping charges to UB-04 revenue codes has plagued cost analyses for years, limiting the granularity of comparisons to total charges for a hospitalization.5, 6, 7 Depending on the consistency of the charge categorization, the standardization may or may not be useful, and there is no way to determine this. Another notable limitation is the 25% of patients excluded for missing charge data. Finally, the authors chose to focus on modifiable risk factors, but this leaves unmodifiable cost drivers unadjusted for. All this points to the fact that quantifying true costs is impossible, even in a state such as Maryland with extensive financial regulation and data capture.”
Source: Hawkins RB, Mehaffey JH. Commentary: Complexity and complications drive cost. J Thorac Cardiovasc Surg. 2023;165(2):773-774. doi:10.1016/j.jtcvs.2021.03.090
“AHEAD (renamed the Achieving Healthcare Efficiency through Accountable Design) is a voluntary state total cost of care (TCOC) model that aims to drive state and sub-state-regional health care transformation and multi-payer alignment to improve the total health of a state’s population while lowering costs. AHEAD includes 6 state participants (Cohort 1: Maryland, Cohort 2: Connecticut, Hawaii, and Vermont, and Cohort 3: Rhode Island and New York) and will run through December 31, 2035, for all cohorts.”
Source: US Centers for Medicare and Medicaid Services, AHEAD (Achieving Healthcare Efficiency through Accountable Design) Model, Accessed July 4, 2026.
Maryland: All-Payer Model
• The AHEAD (Achieving Healthcare Efficiency through Accountable Design) Model
Oregon: Universal Health Plan
Washington: WA Cares Fund
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Page last updated July 4, 2026 by Doug McVay, Editor.