Private Health Plans Pay Hospitals 241% of What Medicare Would Pay
May 9, 2019
Large price discrepancies exist between what private health plans pay for hospital services and what Medicare pays. RAND Corporation researchers used data from three sources — self-insured employers, state-based all-payer claims databases, and health plans — to assess $13 billion in hospital spending in terms of price levels, variation, and trends from 2015 to 2017 in 25 states. The report lists prices relative to Medicare for specific hospitals.
Findings from an Employer-Led Transparency Initiative
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Note: This research and visualization were expanded and updated with the publication of Nationwide Evaluation of Health Care Prices Paid by Private Health Plans: Findings from Round 3 of an Employer-Led Transparency Initiative (RR-4394-RWJ).
Large price discrepancies exist between what private health plans pay for hospital services and what Medicare pays. RAND Corporation researchers used data from three sources — self-insured employers, state-based all-payer claims databases, and health plans — to assess $13 billion in hospital spending in terms of hospital price levels, variation, and trends from 2015 through 2017 in 25 states. In this report, prices reflect the negotiated allowed amount paid per service, including amounts from both the health plan and the patient, with adjustments for the intensity of services provided. These negotiated prices are then compared with Medicare reimbursement rates for the same procedures and facilities to determine relative prices.
Key audiences for this report are (1) self-insured employers that have participated in the study and that are assessing the reasonableness of the prices they are paying for hospital care, (2) other employers that are struggling with high and rising health care costs and that want to better understand patterns and trends in hospital prices, and (3) policymakers and researchers who are concerned with hospital pricing and price transparency. Employers can use this report to become better-informed purchasers, and this report illustrates for policymakers that it is feasible and worthwhile to use claims data from private health plans to measure and compare hospital prices at a high level of detail.
This is the first broad-based study that reports prices paid by private health plans to hospitals identified by name and to groups of hospitals under joint ownership (hospital systems) identified by name.
The research described in this report was funded by the Robert Wood Johnson Foundation, the National Institute for Health Care Reform, and the Health Foundation of Greater Indianapolis and participating selfinsured employers and was carried out within the Payment, Cost, and Coverage Program in RAND Health Care in collaboration with the Employers' Forum of Indiana.
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