Mandatory rate setting first developed in New York State in 1971 with the establishment of a program, eventually housed in the state Department of Health, that covered hospital rates paid by Medicaid and Blue Cross. Massachusetts also created an independent rate setting commission around this time that was empowered to approve Blue Cross contracts with all Massachusetts hospitals and set rates for Medicaid beginning in 1975. New Jersey similarly began setting rates in 1974 for only Blue Cross and Medicaid, under the aegis of the state Department of Health. Independent commissions with the authority to set rates for non-Medicare payers in Maryland, Washington, and Connecticut also started setting rates in 1974, 1975, and 1976, respectively. Later to the rate setting game were systems in Rochester, New York, and the Finger Lakes area of New York in 1980, which were established with the goal of demonstrating that hospital cost containment could be achieved through the use of communitywide all-payer hospital global budgets. The West Virginia system was implemented in 1985 and applied only to commercial insurers (including Blue Cross plans).
