Private Insurers Pay 241 Percent of What Medicare Would Pay

Prices paid to hospitals for privately insured patients in 2017 averaged 241 percent of what Medicare would have paid, with wide variation in prices among states, according to a report published by the RAND Corporation.

Authors Chapin White, Ph.D., and Christopher Whaley, Ph.D., both from RAND Health, examined U.S. hospital prices covering 25 states (Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Massachusetts, Maine, Michigan, Missouri, Montana, North Carolina, New Hampshire, New Mexico, New York, Ohio, Pennsylvania, Tennessee, Texas, Vermont, Washington, Wisconsin, and Wyoming) in 2017. In total, health care claims for more than 4 million people (1,598 hospitals) were assessed, with information coming from self-insured employers, two state all payer claims databases, and records from health insurance plans that chose to participate. Researchers repriced the service for each private claim using Medicare's grouping and pricing formulas.

The researchers found that prices varied widely among hospital systems, ranging from 150 percent of Medicare prices at the low end to 400 percent of Medicare prices at the high end. There was also variance by state. Some states (Kentucky, Michigan, New York, and Pennsylvania) had average relative prices that were 150 to 200 percent of what Medicare paid, while other states (Colorado, Indiana, Maine, Montana, Wisconsin, and Wyoming) had higher average relative prices ranging from 250 to 300 percent of what Medicare would have paid.

"Employers can also encourage expanded price transparency by participating in existing state-based all payer claims databases and promoting development of such tools," White said in a statement. "Transparency by itself is likely to be insufficient to control costs, so employers may need state or federal policy changes to rebalance negotiating leverage between hospitals and their health plans."

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