Nationwide Evaluation of Health Care Prices Paid by Private Health Plans
Congressional alert
September 18, 2020
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Arkadiusz Wargula/Getty Images
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A RAND study released today shows that prices paid for hospital care nationally during 2018 by privately insured patients average 247% of what Medicare would have paid, with wide variation in prices among states. Some states (Arkansas, Michigan, and Rhode Island) had relative prices under 200% of Medicare, while other states (Florida, Tennessee, Alaska, West Virginia, and South Carolina) had relative prices that were above 325% of Medicare. Had employers and health plans participating in the study paid hospitals using Medicare’s payment formulas, total payments over the 2016–2018 period would have been reduced by
$19.7 billion, a potential savings of 58% for employers and their employees.
Authors of the study identified several policy interventions that would give employers additional negotiating leverage on prices without necessarily restricting networks. These include:
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- Efforts to promote competition in health markets that oppose consolidation among existing providers and promote entry of new, low-priced providers
- Efforts to develop and maintain All-Payer Claims Databases (APCDs) and allow these APCDs to be used for price reporting purposes
- Establishing limits on total payments for out-of-network hospital care
- “All payer” and global budget programs that remove employers from the price negotiation process
- Proposals like Medicare Buy-In that potentially allow employers to buy coverage for their employees and pay providers at Medicare prices.
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The RAND study is based on information from 49 states and Washington, D.C. Data sources include $33.8 billion in spending from 3,112 hospitals nationally, including approximately 750,000 claims for inpatient hospital stays and 40.2 million claims for outpatient services. Researchers analyzed health care claims from self-insured employers, six state all-payer claims databases, and records from health insurance plans that chose to participate. For each private claim, researchers re-priced the service using Medicare’s grouping and pricing formulas.
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For questions or to discuss this research, please contact Jared Perkins. |
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RAND Congressional Resources Staff
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Experts and Research Available to You
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Members of Congress and staff can receive free copies of RAND reports and engage with researchers. To request reports, briefings, or meetings, or to invite researchers to testify, please contact:
ocr@rand.org or
(703) 413-1100, ext. 5643. |
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