Apr 4, 2022
Published in: Health Affairs, Volume 41, No. 4, pages 516–522 (April 2022). doi: 10.1377/hlthaff.2021.01476
Posted on RAND.org on April 20, 2022
Commercial health plans pay higher prices than public payers for hospital care, which accounts for more than 5 percent of US gross domestic product. Crafting effective policy responses requires monitoring trends and identifying sources of variation. Relying on data from the Healthcare Provider Cost Reporting Information System, we describe how commercial hospital payment rates changed relative to Medicare rates during 2012–19 and how trends differed by hospital referral region (HRR). We found that average commercial-to-Medicare price ratios were relatively stable, but trends varied substantially across HRRs. Among HRRs with high price ratios in 2012, ratios increased by 38 percentage points in regions in the top quartile of growth and decreased by 38 percentage points in regions in the bottom quartile. Our findings suggest that restraining the growth rate of HRR commercial hospital price ratios to the national average during our sample period would have reduced aggregate spending by $39 billion in 2019.