News: Hospital prices much higher for commercial plans than MA prices for same service, study says

Median hospital prices showed a notable discrepancy between commercial plans and Medicare Advantage (MA) negotiated by the same insurer, in the same hospital, and for the same services, according to a study recently published in Health Affairs. The research found commercial plan prices ranged between 1.8 and 2.7 times more expensive than MA prices, highlighting the different financial incentives and regulations of these markets, HealthLeaders reported.

Researchers used 2022 price information from hospitals given to comply with the price transparency rule. Results showed that commercial prices were between $660 and $707 more expensive than MA prices, and that the ratio is higher at large, teaching, and system-affiliated hospitals and for larger national payers with a major presence in both markets.

“High commercial prices are ultimately passed on to employees and their dependents in the form of lower wages, higher premiums, and higher out-of-pocket expenditures,” the authors of the study wrote. “The large price gap between commercial and MA prices within an insurer reveals the pricing consequences of differing incentives across markets.”

The study points out that out-of-network prices for MA plans are set at 100% of Medicare fee-for-service rates, meaning that hospitals will get Medicare fee-for-service prices from MA insurers if they don’t join their network and therefore insurers will get more negotiating power for their MA plans. Insurers also bear more risk for their MA plans than their commercial plans, but gross margins are nearly twice as high per MA enrollee, so they may accept higher prices for commercial plans if it allows them to stay competitive in the MA market.

Policymakers and stakeholders should note the implications of this study’s findings if they are interested in containing commercial hospital prices, the authors stated.

Editor’s note: To read HealthLeaders’ coverage of this story, click here. To access the full Health Affairs study, click here.