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Reducing private insurance hospital payments will require a lengthy phase-in period
Reducing private insurance hospital payments will require a lengthy phase-in period
- Collection:
- Health Policy and Services Research
- Author(s):
- Skopec, Laura, author
Holahan, John, author - Contributor(s):
- Urban Institute, issuing body.
- Publication:
- Washington, DC : Urban Institute, May 2021
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Costs and Cost Analysis -- statistics & numerical data
Economics, Hospital -- statistics & numerical data
Fees and Charges -- statistics & numerical data
Insurance, Health -- economics
Medicare -- statistics & numerical data
United States - Genre(s):
- Technical Report
- Abstract:
- In 2019, nearly one-third of national health care spending went to hospitals.1 A large body of evidence shows private insurers pay far more than Medicare for inpatient and outpatient hospital services (Blumberg et al. 2020; Cooper et al. 2018; Lopez et al. 2020; Maeda and Nelson 2017; MedPAC 2019; White and Whaley 2019). A 2020 metaanalysis of hospital price studies found private insurers pay between 1.4 and 2.6 times Medicare fees for hospital services.3 Using 2017–18 FAIR Health data, the Urban Institute found private insurers paid 2.4 times Medicare fees for all hospital services, and the ratio of private insurers’ to Medicare’s hospital fees ranged from 1.3 to 3.2 across states (Blumberg et al. 2020). This disparity between Medicare and private hospital fees has led to calls for reining in hospital payments. Despite increased scrutiny of hospital prices, they have continued growing rapidly (CBO 2021; Cooper et al. 2019; Whaley et al. 2020). One study found that private insurance hospital fees grew 5.1 percent per year relative to Medicare fees between 2016 and 2018 (Whaley et al. 2020). The Congressional Budget Office projects that private hospital fees will grow 4.2 percent per year between 2020 and 2030 under current law CBO (2021). Several policy options could reduce hospital fees, however. First, Congress could cap hospital payment rates in private insurance, including the employer-sponsored insurance market and/or the nongroup insurance market (Blumberg et al. 2020). The Medicare Advantage program provides a template for this approach; in the program, out-of-network charges are capped at Medicare rates, effectively giving Medicare Advantage plans leverage to cap payments at Medicare rates in network as well (Holahan et al. 2018). Introducing capped hospital payment rates, either directly or by limiting out-of-network charges, would reduce premiums and lower subsidies paid by the federal government in the Marketplaces, because federal subsidies are tied to Marketplace premiums (Fiedler 2020; Holahan and Simpson 2021a). Other policies, like a public option or Medicare for All, would pay hospitals lower fees, on average, than private insurance while expanding health insurance coverage. For example, a public option could be established that would pay Medicare hospital fees or some multiple thereof, and the resulting savings could be passed on to enrollees. The federal and consumer savings generated would depend on the markets in which the public option is available (e.g., nongroup only or both nongroup and employer-sponsored) and how hospital fees in the public option compare with current fees (Blumberg et al. 2020; Fiedler 2020; Holahan and Simpson 2021a). High enrollment in a broadly available public option plan may pressure hospitals to accept lower payments from private insurers as well. But if payments are set too low, some hospitals may choose not to participate, reducing access to care.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-DC license. (More information)
- Extent:
- 1 online resource (1 PDF file (13 pages))
- NLM Unique ID:
- 9918316587906676 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/9918316587906676