Insurers paid hospitals 254% of what Medicare would pay in 2022

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Prices paid to hospitals by employers and private insurers for both inpatient and outpatient services in 2022 averaged 254% of what Medicare would have paid, with wide variation in prices among states, according to a new RAND report.

Some states, such as Arkansas, Iowa, Massachusetts, Michigan and Mississippi, had relative prices under 200% of Medicare, while other states – California, Florida, Georgia, New York, South Carolina, West Virginia and Wisconsin – had relative prices that were above 300% of Medicare.

Even as the number of hospitals and insurance claims analyzed has grown across multiple rounds of the Hospital Price Transparency Study, the state-level average price has remained above 200% of Medicare – from 247% of Medicare prices in 2018 to 224% in 2020 and to 254% in 2022.

"The utility of this work is that it gives employers important tools they can use to become better-informed purchasers of healthcare services," said Peter S. Hussey, director of RAND Health Care. "Hospitals account for the largest share of healthcare spending in the United States so this report also provides valuable information that may aid policymakers interested in curbing healthcare costs."

WHAT'S THE IMPACT?

Spending on hospital services accounted for 42% of total U.S. personal healthcare spending for privately insured individuals in 2022, and hospital price increases are key drivers of growth in per capita spending among the 160 million Americans with private insurance, the report found.

Recent federal policies require hospitals to post prices for at least 300 "shoppable" services and that insurers post their full set of negotiated rates. But many hospitals have not complied with these policies, and insurer-posted data contains redundant information that often makes file sizes so large that they are difficult to use.

The study found that in 2022, relative prices for inpatient hospital facility services averaged 255% of Medicare prices, outpatient hospital facility services averaged 289%, and associated professional services averaged 188% of what Medicare would have paid for the same services.

Prices for common outpatient services performed in ambulatory surgical centers averaged 170% of Medicare payments.

Also touched upon was the cost of specialty prescription drugs, comparing prices for medications administered in hospital settings versus those that are administered in physician offices.

Weighting each state's prices equally, researchers found that commercial insurance prices for select administered drugs received in a hospital setting averaged 278% of average sales price, compared with 106% of average sales price paid by Medicare.

Very little variation in prices is explained by each hospital's share of patients covered by Medicare or Medicaid. A larger portion of price variation is explained by hospital market power.

THE LARGER TREND

The study is based on information about more than 4,000 hospitals in 49 states and Washington D.C. from 2020 to 2022. Maryland is excluded from the analysis because it has long had a system in place in which the privately insured and Medicare recipients pay the same price.

A detailed list of both relative and standardized prices for each facility, identified by name and Medicare Provider Number, is included in the report's supplemental material.
 

Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.