Why Orthopedic Surgery for Elderly Indicates that the Maryland Total Cost of Care Model should be Universally Adopted
Authors: Pettingill Bernard 
Published: June 2021

Arthritis is the disease that kills the fewest but cripples the most. With the aging of the population in the United States and the antiquated DRG reimbursement system for hospital surgical intervention, it is inevitable that the Medicare assistant will bankrupt itself prior to the proposed bankruptcy date of 2026 if changes are not made. It may change would be to insist that the system in Maryland for reimbursement to hospitals for essential joint replacement surgery of the elderly be adapted nationwide.

Medicaid expenditures are driven by a variety of factors, including the demand for care, the complexity of medical services provided, medical inflation, and life expectancy. The Medicare program has two separate trust funds – the Hospital Insurance (HI) Trust Fund and the Supplementary Medical Insurance (SMI) Trust Fund. Under the Hospital Insurance Trust, payroll taxes from workers and their employers go towards paying for the Part A benefits for today’s Medicare beneficiaries. In 2019, Medicare provided benefits to over 60 million elderly patients at an estimated cost of $796 billion [1].

While excluding the significant decrease in payroll taxes during the COVID-19 pandemic, the latest 2020 projections calculate Medicare Hospital Trust insolvency by 2026 [2]. The 2020 report declared that funds would be sufficient to pay for only 90 percent of Part A expenses at the time of this writing.

Since inception, the Hospital Insurance Trust has never been insolvent, because there are no provisions in the Social Security Act that govern what would happen if insolvency were to occur. Ten of the last twelve years have witnessed expenditure outflows outpacing the Hospital Insurance Trust inflows, resulting in total Medicare spending obligations outpacing the increasing demands on the federal budget, as the number of elderly beneficiaries and the per capita health care costs continue to grow [2].

One of the principal goals of the following study is to determine how elderly patients, who often suffer from acute stages of arthritis and other orthopedic diseases, due in part to wear and tear, can continue to demand surgical intervention, in particular joint replacement surgery. Arthritis has been described as the disease that kills the fewest but cripples the most. With that in mind, the hospital systems ability to absorb the ever increasing number of elderly patients who demand joint replacement surgeries will continue to outstrip supply. The principal author of this study completed his PhD dissertation at the University of Manchester in 1977 by measuring the cost-benefit analysis of the treatment of chronic rheumatoid arthritis in Great Britain. Therefore, the author of this study aims to show the only reasonable method of payment for the imminent immeasurable demand for treatment for the elderly for age related diseases such as joint replacement surgery [3].

A recent Journal of Rheumatology article projects Medicare will finance approximately 2.67 million joint replacement surgeries by 2035, plus an additional 2.35 million joint replacement surgeries by the year 2040 [4]. The author believes that the current nationwide Diagnostic Related Groups (DRGs) system that helps determine how much Medicare pays the hospital for each “product” needs to be phased out as soon as possible. Our research shows that prior to Medicare implementing the DRGs payment system, Maryland proved that their total cost model of state-wide rewards and penalties compensated “efficient and effective” hospitals, providing care as defined by metrics set up by the Health Services Cost Review Commission (HSCRC). The Maryland legislature granted this independent government agency the broad powers to insulate the HSCRC from conflicts of interests, regulatory capture, and political meddling in the long term. In exchange, the HSCRC had the freedom to design a system that must deliver on three areas: cost reduction of hospital services, health improvement for all Maryland residents, and quality of life care improvements.

Since inception of the HSCRC, all stakeholders are legally required to comply with robust auditing and data-submission requirements that allow the agency to collect data on the costs, patient volume, and financial condition of all inpatient, hospital-based outpatient, and emergency services in Maryland. This level of transparency allows the agency to set prices for hospital services, and hospitals must obey because it is Maryland law. Because of this methodology, HSCRC-approved average Maryland hospital markups ranged from 18 percent in 1980 to only 22 percent in 2008. During that same period, the average hospital markup nationally skyrocketed from 20 percent in 1980 to more than 187 percent in 2008 [5]. This strong evidence is the primary reason why the HSCRC has continued to receive a federal waiver from the Centers for Medicare and Medicaid Services, which requires both Medicare and Medicaid to pay the HSCRC-approved rates statewide. No discounts are given because of volume, nor any shifting of costs to other payers. There is a mandate: same price for the same service at the same hospital, no exceptions. Adjustments for uncompensated medical care are automatically bundled into the HSCRC-approved rates, as thus, this financial burden is shared by all hospitals in Maryland.

This article explores the important milestones taken by the state of Maryland and how the lessons learned are responsible for the impressive results of their program today. This author believes that by applying the Maryland Total Cost of Care Model (Maryland TCOC Model) nationwide will yield financial savings of at least $227 billion by 2035, plus another $280 billion by 2040, exclusively from joint replacement surgeries reimbursed at HSCRC-approved rates and not any other method.