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Private insurers paying over 200% of what Medicare covers in care costs

by John R. Fischer, Senior Reporter | May 20, 2022
Business Affairs Insurance

For the most common types of care in this study and the previous one, prices in 2020 averaged 252% of what Medicare spent. Costs for common outpatient services performed in ambulatory settings were 162% of this. When using Medicare payment rates for hospital outpatient department spending, the number dropped to 117%. Among five procedures, hospital outpatient departments paid on average $6,304, while ambulatory surgery centers paid $2,404.

In a statement, American Hospital Association president and CEO Rick Pollack criticized the findings of the RAND Corporation report for evaluating claims for just 2.2% of overall hospital spending, which only represents a small share of what hospitals and health systems pay toward costs. He also says that spending differs from hospital to hospital. "The results highlight what even the Medicare Payment Advisory Commission (MedPAC) acknowledges: Medicare does not fully cover the cost of providing care to Medicare beneficiaries. Pinning commercial prices to inadequate Medicare rates would cause even more financial strain to hospitals already facing tremendous challenges as a result of the ongoing COVID-19 pandemic and rising inflation. The result could be reduced patient access to care."

For their analysis, the authors analyzed claims from self-insured employers, 11 state all-payer claims databases and records from health insurance plans that chose to participate.

The study was supported by the Robert Wood Johnson Foundation and participating self-insured employers. The Employers’ Forum of Indiana helped conduct it.

The analysis is available on the Rand website.

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