Hospitals charge private insurers more than 2x what Medicare pays: 6 things to know

For the study, scientists at RAND Corp. examined 750,000 claims for inpatient health center stays and 40.2 million claims for outpatient services in between 2016 to 2018. The sample consisted of information from 3,112 healthcare facilities throughout 49 states. Because of its all-payer rate setting program, information from Maryland was gathered however omitted.

Hospitals across the U.S. charge private insurance companies an average of 247 percent more than what Medicare would pay for the very same care, according to a RAND Corp. study published Sept. 18..

Alia Paavola –
Friday, September 18th, 2020

6 things to understand:.

1. The overall payments to medical facilities from 2016 to 2018 would be reduced by $19.7 billion if personal health plans paid healthcare facilities utilizing Medicares payment rates. This represents a potential savings of 58 percent.

2. From 2016 to 2018, the general rate for health center and outpatient care increased by a compounded annual rate of 5.1 percent.

3. There is variation in medical facility care prices based on state. Personal insurance providers in some states, including Florida, Tennessee, Alaska, South Carolina and West Virginia, paid three or more times what Medicare provided for inpatient stays and outpatient care.

4. In contrast, hospitals in some states like Arkansas, Michigan and Rhode Island charged under 200 percent of what Medicare would pay..

5. The RAND research study also discovered a broad variation in costs within the same healthcare facility system. For instance, in the Boston-based Mass General Brigham, its Massachusetts General Hospital charged private insurers nearly 3 times what Medicare paid, while its Newton-Wellesley Hospital charged personal insurance providers about two times what Medicare paid..

6. The American Hospital Association raised concerns about the study. “It is regrettable that RAND continues to make broad claims about prices based on a restricted and cherry-picked information set. This consists of a hand-picked sample of companies and insurers whose claims represent simply 0.7 percent of inpatient admissions and 1.8 percent of outpatients check outs over the research study duration, as well as measuring quality through Leapfrog information that might be imprecise or old,” said Tom Nickels, executive vice president of the American Hospital Association..

For the study, researchers at RAND Corp. examined 750,000 claims for inpatient health center stays and 40.2 million claims for outpatient services between 2016 to 2018. The sample included information from 3,112 health centers throughout 49 states. If private health plans paid hospitals using Medicares payment rates, the overall payments to health centers from 2016 to 2018 would be lowered by $19.7 billion. There is variation in hospital care prices based on state. The RAND study likewise found a broad variation in rates within the exact same health center system.

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