The Healthcare Pricing System Isn’t Working
In a recent study released by the Rand Corporation, the authors describe a national healthcare pricing system with vastly different costs depending upon where you live and your insurance benefits. These differences will certainly have an impact on the upcoming political debates. Managers of risk, claim and other corporate benefit functions will benefit from reading and understanding the findings of this study.
The study found that Medicare prices are significantly less than what private insurance plans pay for hospital services, depending upon where you live. In this study, researchers used data from self-insured employers, state-based all-payer claims databases, and health plans to analyze $13 billion in hospital spending from 2015 to 2017 in 25 states. This data was then compared with Medicare reimbursement rates for the same population, procedures and facilities to determine the relative price differences. The highlights from the report include:
- Relative prices varied twofold among states. Some states (Michigan, Pennsylvania, New York, and Kentucky) had relative prices in the range of 150 to 200 percent of Medicare rates, while other states (Colorado, Montana, Wisconsin, Maine, Wyoming, and Indiana) had relative prices in the range of 250 to 300-plus percent of Medicare rates.
- Among hospital systems, prices varied nearly threefold, ranging from 150 percent of Medicare rates at the low end to 350 to 400-plus percent at the high end.
The authors offered recommendations from their study including:
- Employers can exert pressure on their health plans and hospitals to shift from discounted charge contracts to Medicare “plus” rate structures.
- Employers can use networks and benefit designs to move patient volume away from high-priced, low-value hospitals and hospital systems.
- Employers can encourage expanded price transparency by participating in existing state-based all-payer claims databases and promoting development of new ones.
- Transparency by itself is not likely to reduce hospital prices, and employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans.
To read the report packed with insights for risk, claim and other corporate benefit functions, please click here >>