BALTIMORE Marylands former health and mental hygiene secretary is warning state officials against raising fees on hospitals to pay for Marylands federally required health exchange, saying the levies will end up hurting consumers.

That money is passed on and included in [hospital] rates ... and ultimately comes out of somebody elses pocket, John M. Colmers told a state-appointed committee charged with sending Gov. Martin OMalley a recommended funding model for the exchange by the fall.

Its not out of the [insurance] carriers [pockets], its not out of the hospitals, its out of the [pockets] of people who pay the bills.

Maryland Health and Mental Hygiene Secretary Joshua Sharfstein, chairman of the committee, argued hospitals could afford to contribute to the exchange because their uncompensated care costs will drop as a result of it.

The exchange, an insurance marketplace that the federal health care law requires states to have working by 2014, is expected to cost Maryland up to $50 million annually. An assessment on hospitals is one of many revenue options that Maryland officials are considering to pay for it.

Sharfstein says hes leaning toward a funding model that would include a small transaction fee on the purchase of health insurance through the exchange, as well as a broad-based assessment, such as hospital fees or an increase in the cigarette tax.

A transaction fee, which would come from insurance providers participating in the exchange, could be easily hidden from consumers, Sharfstein said. State officials dont want consumers to associate extra fees with the exchange, or there will be a disincentive to participating in the state-controlled marketplace.

But Colmers warned that state officials will have a hard time justifying broad-based assessments, which would affect patients and providers outside the exchange. Anyone who has to pay for the exchange deserves an explanation of how they are benefiting from it, he said.

I have no difficulty understanding that this is a bit like playing jazz and you are going to have an arbitrary if not capricious approach to it, but I would at least like to have some specific criteria for evaluating the value of certain benefits, he said.

Darrell Gaskin, co-chairman of the committee, argued the exchange will benefit the entire state, and therefore everyone should have to pay for some of it.

If someone builds a mall, the roads to the mall are built publicly, he said. The infrastructure that supports everything that allows for it to exist is paid for, more so, by the general community.

hpeterson@washingtonexaminer.com