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RAND Study: Insurers Pay Hospitals More Than Medicare

Across the nation, hospitals treating patients with private health insurance were paid overall 2.4 times the Medicare rates in 2017, according to the RAND analysis. The difference was largest for outpatient care, where private prices were almost triple what Medicare would have paid.The study illustrates the widening chasm between what the federal government and the private sector pay the nation’s hospitals.

Some proponents of “Medicare for all” argue that employers and private insurers have failed to control costs. About one-third of all health care spending in the countrygoes to pay for hospital care. Many supporters point to the billions of dollars that could be saved annually if hospitals and doctors were paid at the much lower Medicare rates.

Because rates are normally a closely held secret between insurers and hospitals, the RAND study reveals a startling first glimpse of how much — and how steep the difference — a broad swath of hospitals are charging private insurers. The lack of transparency, coupled with public outrage over rising hospital bills, has spurred calls for disclosure of the rates negotiated. This is the first time pricing information on a large group of individual hospitals has been made public.

Read more in The New York Times

Hospitals object.  “We feel strongly that the RAND report inaccurately represents payments received by our hospitals,” said a spokeswoman for Brentwood, Tenn.-based Quorum Health Corp., which RAND listed as having the highest prices among 70 health systems studied. She said the study reflected seven of 26 Quorum hospitals and that the health system’s data shows its payments are between 30% and 50% lower than some of the relative prices in the report.

Hospital trade groups made the case that Medicare is not an adequate benchmark to compare hospital prices because it does not fully cover the average cost of caring for a Medicare patient.

“It is wrong to assume that Medicare, which pays hospitals 11% below cost, sets a standard that ensures all patients access to the hospital care they deserve and expect,” said Chip Kahn, CEO of the Federation of American Hospitals.

Read more in Modern Healthcare

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