Views expressed in opinion columns are the author’s own.
We expect our government to keep its promises. The state of Maryland promised to provide quality health care to its retired faculty, staff and other state employees. In a cost-cutting move, it is poised to break this promise.
By the end of the year, the state could restrict prescription drug coverage for its retired state employees by replacing the current state plan with federal plans that may not cover the same medications. This could force some people to confront massive increases in out-of-pocket costs for life-saving prescriptions. Even worse, those who don’t sign up for the federal plan will be left without prescription drug coverage.
This state made a promise to its employees. Maryland should keep it by restoring its drug plan and paying hospitals directly instead of contracting private insurance providers.
The value of the state’s former plan was its certainty — employees could look to the future and know what coverage they would have as retirees and how much that coverage would cost. With the obscene cost of prescription drugs, Maryland’s broken promise will leave many scrambling to break even.
Medicare Part D, the federally funded replacement plan Maryland is set to take on, is likely to become entangled in wider political debates. Political opposition to Obamacare, which reduced costs for those on Part D, remains strong — Donald Trump has promised to repeal Obamacare if elected to a second term. If this happens, Marylanders forced onto Medicare Part D could see their out-of-pocket costs skyrocket.
Despite all the downsides of Part D, the decision to change the state’s health care plan was a cost-saving measure. However, Maryland could keep the plan while still saving costs by making the plan use reference based pricing, where employers can set a ceiling on charges instead of providers choosing a cost, instead of private.
Under a traditional private plan, states contract private insurance companies to provide state-funded health care. These providers can negotiate ludicrously expensive billing agreements with hospitals. Under these private plans, the state is forced to pick up a portion of this unnecessarily massive bill.
For example, say a patient under a private plan is prescribed blood thinners at a hospital. The private insurance provider the patient is covered under will pay whatever amount it negotiated for that specific drug at that specific hospital, then forward portions of that bill to the state and the patient.
North Carolina takes a different approach through a reference-based pricing plan. All its payouts for state health care costs are made in reference to federal Medicare payouts. For every drug covered under Medicare, the federal government will pay a portion of its costs. North Carolina takes those specific payouts, adds an additional fixed percentage and pays that amount to hospitals for each drug covered under the plan. This ensures hospitals maintain a profit healthy enough to keep them in business.
For example, say a patient under North Carolina’s plan is prescribed blood thinners at a hospital. North Carolina takes what Medicare would pay for those blood thinners, adds on a fixed percentage, then pays that amount to the hospital. Then, depending on the plan’s specifics, the patient pays a small amount of the bill.
By using a state-funded reference-based pricing plan, the state pays less than it would on a private plan, since it caps states’ payouts to hospitals. This allows states to keep pace with the cost of these plans.
These savings also come back to citizens. By reducing the overall cost of health care, these plans reduce the amount people on the plan have to pay. In North Carolina, state retirees are projected to be spared up to $60 million in out-of-pocket expenses, thanks to the new plan.
North Carolina isn’t the only state to adopt this policy — Montana and Oregon adopted similar policies in 2016 and 2019, respectively. If Maryland follows these states’ examples, it will save money by avoiding costly private insurance providers and ensure retirees can keep their medications.
Maryland doesn’t need to ax its drug plan. Reference based pricing can save costs and sustain the plan, allowing those on it to keep their coverage and avoid plunging into debt from sudden out-of-pocket cost increases.
Leaving retirees in the lurch isn’t a solution, but a reference based pricing option is. Retirees have served Maryland faithfully. Now, it’s time for Maryland to serve them.
Ben Dodge is a freshman computer science major. He can be reached at bdodge1@terpmail.umd.edu
