Which state has the best hospital in the country (for the 20th year in a row)? Which state has the lowest health insurance premiums as a percentage of median household income? Why, it's Maryland. As you may have heard, some House Democrats have introduced a bill trying to create a public option. The point of the public option, as I've pointed out in multiple posts, is to pressure providers to stop extorting ever-higher reimbursements from insurers (which in turn leads to ever-increasing premiums). As I explained a bit in this thread, providers have gotten very good at using market clout to drive costs up, often charging different rates of different payers for the same service. To steal a bit from that other thread, here's an example from Massachusetts: The same thing has been happening in California and, no doubt, other states. The public option gives private insurers the leverage they need to go toe-to-toe with providers and force them to stop exploiting their market clout with higher and higher markups of their services. But that's an indirect way of getting at what we're after--it's an attempt to try and harness market forces to work in favor of lower (or at least less rapidly rising) premiums instead of higher ones. In some circles, however, the public option remains controversial and in other threads some have expressed concerns that the introduction of a public option is some nefarious plot to build a single-payer system. Which brings us to Maryland. They don't have a public option, yet they achieve directly what the public option is supposed to achieve in a roundabout way (providers playing nice with insurers). They're the only state in the country that currently has what's known as an all-payer rate setting system. I'll let the guy who administers that system explain it: The Wall Street Journal had a nice article on the Maryland system last year with a pretty striking graphic: As that article notes, Now, Maryland may be the only state to have all-payer rate setting today but other states have tried doing it in the past and abandoned those systems, mostly because their schemes weren't built quite as well as Maryland's. But Maryland shows that a well-designed all-payer rate setting system (in which all payers--even public payers like Medicare and Medicaid--pay the same rates for the same services, under the watchful eye of an independent commission) can keep costs in check and prevent providers from running the show. I'd like to see more states try this, which would quite possibly eliminate the problem the public option is intended to address.