Rand: Private insurance pays more than twice what Medicare does

Henrietta Strickland
May 12, 2019

The American Hospital Association took issue with the study, and said the report's sample size was small and represents 2% of Americans with employer-sponsored coverage. Rand's data reflects about 4 million people's claims and a third of USA hospitals. The AHA also responded that Medicare rates should not be held as a standard benchmark for hospital prices because Medicare reimburses below the cost of care. "We all want to know which hospitals provide the best value (best quality at best cost)".

"Discounted-charge contracts are relatively simple and have historically been common, but they allow wide and unwarranted variation in prices, and they leave employers and their plans vulnerable to aggressive inflation of charges by some hospitals", they wrote. This could save employers money and eliminate price variation.

The prices paid to US hospitals by private insurers are about 2.4 times higher than the rates Medicare would have paid, according to a new Rand Corp. study.

"Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care", the group said in a statement Thursday. It is one of the few reports that shows relative prices at both the individual hospital level and the system level.

If employers and health plans participating in the study had paid hospitals using Medicare's payment formulas, total payments over the 2015-2017 period would have been reduced by $7 billion - a decline of more than 50%. While the relative prices of inpatient and outpatient care were almost the same in the hospital with the lowest prices-still 150% of Medicare-for the hospital system with the highest prices-nearly 450% of Medicare-there was a much bigger difference.

However, eight states - Michigan, New York, Tennessee, Massachusetts, Louisiana, New Hampshire, Montana and ME - stand out as exceptions to this general finding, with relative prices that are roughly equal for inpatient and outpatient services, RAND said.

"The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided", said Chapin White, the study's lead author and an adjunct senior policy researcher at RAND, a nonprofit research organization.

Outpatient prices were higher for emergency department services and imaging, while inpatient prices were higher for orthopedics and circulatory conditions, and lower for childbirth, substance abuse and mental health conditions. The research also found that prices varied almost 3-fold among hospital systems.

The RAND study found that hospital prices relative to Medicare increased rapidly from 2015 to 2017 in Colorado and in, while they fell in MI over the same period. That includes outpatient prices of 590 percent of Medicare and inpatient prices of 249 percent of Medicare.

The analysis of 1,598 hospitals is a broad-based study of prices paid by private health plans to hospitals and is unique in presenting price information about a larger number of hospitals across many states.

"We were stunned. We're Indiana". "The goal of this hospital price transparency study is to enable employers to be better shoppers of health care on behalf of their employees", Gloria Sachdev, president and chief executive officer of the Employers' Forum of IN, said IN a statement.

Sachdev said she showed the results of the study to a handful of IN health system executives and even they were shocked to see how high their prices were relative to their competitors.

Other reports by Click Lancashire

Discuss This Article

FOLLOW OUR NEWSPAPER