What is an all-payer agreement model?

This blog dives into what an all-payer model agreement is and if we should expect to see more states incorporate this model in the future.

What is an all-payer model agreement?

An all-payer model agreement is a system where a healthcare costs are the same for every patient under the same provider, no matter what insurance coverage the patient might hold. This means that, for this type of model, “all payers” pertains to private health insurance plans, large employer self-insured health plans, uninsured patients and Medicare and Medicaid plans (under an approved waiver). 

According to the National Conference of State Legislatures (NCSL), payment rates "may be set per service or per case (e.g., hospital care for a heart attack). Rate setting has mainly been used for hospital inpatient and outpatient services."

An all-payer model has advantages for both healthcare providers and patients. An upfront payment system provides cost control incentives and price transparency, and encourages equal access to physical and mental health treatments. It also can reduce administrative burden and simplify health care providers’ payer negotiations.

Maryland's all-payer model

Maryland, the poster child for the all-payer model since 2014, has rates for services or treatments that can be set by a state authority or by providers. Maryland’s all-payer model is primarily for hospital services, and is the only state with a hospital finance all-payer system. 

According to the Centers for Medicare & Medicaid Services (CMS), Maryland’s aim is to reduce the all-site hospital readmissions rate; reduce 65 preventable hospital-acquired conditions, also known as Potentially Preventable Complications (PPCs); and measure population health through various population health measures.

From 2014–2018, CMS conducted research into the efficacy of the all-payer model in Maryland known as the performance period.

The findings, taken directly from CMS,give a look at what happened during the performance period and include the following:

• Hospitals successfully reduced utilization and lowered expenditures for beneficiaries with multiple chronic conditions and beneficiaries eligible for both Medicare and Medicaid more than their counterparts. 
• Commercial insurance had 6.1% slower growth in total hospital expenditures but growth in total expenditures did not slow. Emergency department (ED) visits and inpatient admissions declined for Maryland residents enrolled in commercial insurance although the decline was not statistically significant for all inpatient admissions.
• Admissions and ED visits trended downwards for Medicaid beneficiaries.
• Although Maryland hospitals focused on improving patient experience, patient satisfaction scores were unaffected. 

Overall, the performance period saw some positive findings, but not many significant changes. This project has been going on for years, so it’s safe to assume that this model will continue but likely to shift and change to provide more substantial results (e.g., Vermont's all-payer ACO model). We do not currently know how Maryland's model versus any other model will fare, considering the growing transparency legislation (e.g., the federal No Surprises Act). 

Both Vermont and Colorado have also adopted all-payer models.

Vermont's all-payer ACO model

CMS is using Vermont's All-payer Accountable Care Organization (ACO) Model as a new test of an alternative payment model. In this model, the most significant payers throughout the state (i.e., Medicare, Medicaid and commercial payers) focus on health outcomes by incentivizing value and quality of care.

Participation is voluntary for providers and other payers. This is considered a type of value-based care program and more info can be found on the Quality Payment Program website. 

Vermont's All-payer ACO Model began in 2017 with a five-year commitment. It has now been extended through 2025.

Colorado's Alternative Payment Model (APM)

Colorado is moving away from the fee-for-service model and aims for a value-basedcare model. The state aims to have50% of Medicaid payments tied to a value based arrangement by 2025.

As value-based care is continually tested as a strong alternative to the typical fee-for-service model, we can expect to see growing changes made in states throughout the American healthcare system. For more information about value-based care, see our blog "Defining Value-based Care."

Connecticut & Hawaii Join the Trend

In July 2024, the Centers for Medicare & Medicaid Services announced that Connecticut and Hawaii will be joining Maryland and Vermont in a new all-payer initiative.

The AHEAD model (All-Payer Health Equity Approaches and Development) will provide federal funding and other tools to participating states with a goal of addressing healthcare cost growth and supporting health equity.

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