News: Private insurers paid hospitals 241% of what Medicare would have

Private health plans paid hospitals 241% of what Medicare would have in 2017, up from 236% in 2015, according to a new study from RAND Corporation. Though the study found that prices paid to hospitals by private insurers vastly outpaced prices paid by Medicare, there was a wide variation across the 25 states that were examined, HealthLeaders Media reported.

States like Kentucky and New York had average relative prices at 150% to 200% of what Medicare paid, while states like Colorado and Wisconsin had prices at 250% to 300% of the Medicare rate. 

According to RAND, some of the greatest price variation occurred at hospital systems, ranging from 150% to above 400% of what Medicare paid. Outpatient services recorded significantly higher relative prices than Medicare, 293%, than inpatient services, 204%; though eight states reported generally equal prices between the two categories.

The study found that reducing hospital prices to Medicare rates would have resulted in $7.7 billion in savings for employers from 2015 to 2017, while reducing prices from the 75th to 25th percentile would have reduced employer spending by $1.4 billion, or 40% of hospital spending, in 2017, HealthLeaders Media reported.

The study mentions that policymakers interested in promoting greater price transparency and accountability for hospital prices can benefit from the data included as they debate potential legislative fixes.

In a statement to HealthLeaders Media, however, American Hospital Association General Counsel Melinda Hatton expressed “a number of concerns” about the RAND study, taking issue with its sample size and the usage of Medicare payment rates as the benchmark for hospital prices.

“Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care,” Hatton wrote. “Hospitals would not have the resources needed to keep our doors open, innovate to adapt to a rapidly changing field and maintain the services communities need and expect.”

Editor’s note: To read HealthLeaders Media’s extended coverage of this story, click here. To read the full RAND study, click here. To read about recent price transparency legislation, click here.