Why Medicare appears less costly and you may be helping

Hospitals’ average prices for commercial payers only slightly distanced themselves from Medicare rates from 2012 to 2019, although broad variations spotted between individual geographic regions suggest room for policies to limit commercial price growth, according to a recently published RAND Corporation study.

Citing data submitted by hospitals to the federal government’s Healthcare Cost Report Information System (HCRIS), researchers found hospital prices for commercial health plans in 2012 averaged 173% of what Medicare was paying. That gap widened by seven percentage points to 180% on average in 2019, they wrote in April’s Health Affairs.

Source: RAND: Broad geographic variation in hospitals’ commercial prices spells opportunity for cost reduction policy | Fierce Healthcare

But it not just hospitals. For physician services, private insurance paid 143% of Medicare rates, on average, ranging from 118% to 179% of Medicare rates across studies.

So, are younger Americans subsidizing Medicare in more ways than one? You betcha! However, there is a much more important issue.

What would happen to our health care system if all health care was paid for at Medicare rates? Before concluding we would all save money, let’s think this through.

Would some hospitals and other facilities be forced out of business?

Would lower reimbursements make the medical profession less desirable? Could that lead to shortages of doctors and other professionals?

Proponents of M4A base their anticipated saving projections on Medicare allowable fees. There are consequences.

We need to think this through.

3 comments

  1. Years ago there was a tv commercial that yelled out “we’re not going to pay a lot for this muffler”. I’m sensing that same vibe from the people who think they can make that slogan work for healthcare. It won’t work in the real world unless we can somehow arrange for teledoc visits with providers in India or Central America. Hospital care would be along the lines of the giant wards I see in pictures of long ago. Forget cutting edge medicine. Yeah I think shrinking reimbursements would work.

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    1. The problem with open bay wards today is that hospitals are closing and building new ones so that every patient has their own room. It was not to control infection but to make it easier to comply with the HIPAA privacy rules. The patient in the next bed cannot hear the nurses and doctors if you are in a private room. Of course that cost more from square footage to more nurses since they just can look down a row of beds or only a few steps to the room from the nurse’s station.

      I am pretty sure the only person that doesn’t know about what’s wrong with me and what’s in my medical records is me. Usually the first thing you do is sign away your HIPAA rights to the medical staff can consult and get paid by the insurance companies.

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