Privately Insured Pay Twice What Medicare Pays Hospitals

A Rand Corp. study has found that people with private insurance — 156 million of them with health insurance from work — pay, on average, twice more for hospital care than what those on Medicare pay.

private-insurance-pays-hospitals-twice-Medicare-ratesThe study is based on payment rates by private insurers in 25 states to 1,600 hospitals, and concludes that had the rates been the same as Medicare across the board, the nation would have saved $7.7 billion in health care costs between 2015 and 2017.

“If we want to reduce health care spending,” said Christopher Whaley, a Rand economist and one of the paper’s two authors, “we have to do something about higher hospital prices.”

Publishing prices might give employers and health insurers more clout in negotiating better rates, but the study casts some doubt on that option.

“Employers and health plans in a lot of cases are really at the mercy of big, must-have systems. If you can’t legitimately threaten to cut a provider or system out of the network, it’s game over,” said Chapin White, a Rand policy researcher and Whaley’s co-author.

Indiana’s ratio comes in at 3-to-1 over Medicare, while Michigan — thanks to negotiations by the United Auto Workers (UAW) — the ratio is only 1.5-to-1. According to Gerard Anderson, a Johns Hopkins health policy professor, Medicare and private insurers in the 1990s paid virtually the same amount for individual services.

NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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