HSCRC outlines AHEAD transition; proposes 2027 Medicare Advantage rate adjustments

John Crom, executive director of the Health Services Cost Review Commission, told lawmakers HSCRC and MDH negotiated an amended AHEAD agreement with CMS that began in 2026 and will guide Maryland’s hospital rate-setting and cost-savings targets for the coming decade. Crom said the amended agreement keeps global budgets for hospitals but includes a three-year transition in which federal fee-for-service Medicare rate-setting will shift over time.

Crom described a multi-agency regulatory working group that recommended choice and competition initiatives and a cost-shifting proposal that would spread required state savings across payers. One working-group recommendation under consideration is a mechanism that would apply a discount to hospital rates for Medicare Advantage plans starting Jan. 1, 2027, to account for differences between Maryland’s global-budget approach and federal MA reimbursement formulas.

When senators asked about the market impact and the possibility of short-term bridges for plans facing exits, Crom said the 2027 start date is intended to allow time for careful rate calculations and market adjustments. "We have to calculate the rates, right? So there's months of work in front of us to figure out how the rates are going to be determined," Crom said. He also warned that raising hospital rates as a tool to address MA shortfalls could create premium impacts in commercial markets.

DLS had asked HSCRC to comment on how hospital assessments might have to change to comply with CMS’s final rule on Medicaid provider taxes; Crom acknowledged that Maryland’s assessments are under CMS review and that HSCRC is coordinating with MDH to determine changes needed to meet the uniform and broad-based tax requirements by the end of FY2028.

HSCRC thanked DLS for recommending the release of $250,000 in special funds based on a report HSCRC submitted on Medicare Advantage incentives under the AHEAD model. Crom said HSCRC will continue working with stakeholders, hospitals and payers during the technical rate-setting period and intends to provide further analysis to the subcommittee.