RAND researchers suggest that private insurers may want to move away from discounted-charge contracting for hospital services and shift to contracting based on a percent of Medicare or another similar fixed-price arrangement, often called reference-based pricing.
Employers can use the information in this report to help inform these comparisons and to make judgments about appropriate pricing.”
The study notes a steady increase in hospital prices, rising to the 2018 average level from an average of 224% of Medicare costs in 2016 and 230% of Medicare costs in 2017.
The analysis, which includes information from more than half of the nation’s community hospitals, is a broad-based study of prices paid by private health plans to hospitals. A study from RAND last year looked at similar metrics from hospitals in 25 states.
“This analysis provides the most-detailed picture ever of what privately insured individuals pay for hospital-based care relative to what the government pays for people insured through Medicare,” said Christopher Whaley, the study’s lead author and a policy researcher at RAND, a nonprofit research organization. “Especially during the COVID-19 pandemic, employers need transparent information on the prices that they and their employees are paying for health care services.”
If employers and health plans participating in the study had 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%.
“The rising gap between public and private hospital prices is a cause for concern and raises questions about the efficiency of the employer market,” said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, which sponsored the project. </SNIP>