Health plans

Health plans pay twice as much as Medicare

In one report and accompanying database released last week, the Oregon Health Authority (OHA) shows that in 2019, commercial insurers paid Oregon hospitals double what Medicare paid for the same services. The weighted average shows that hospitals received 178% of Medicare’s comparable fee-for-service (FFS) rate for inpatient hospital services and 247% for outpatient hospital services. This means that employer-sponsored plans pay significantly more for hospital services, costing companies more in premiums and costing people more in deductibles, co-payments and other out-of-pocket expenses.

“The pandemic has shown how critical it is for every person in Oregon to have affordable health insurance that allows them to access the care they need, when they need it,” said Jeremy Vandehey, director of the OHA’s Health Policy and Analytics Division “Unfortunately, the costs are too high for too many people. This data and analysis supports our work to create transparency on healthcare costs so that we can collectively understand where system costs are high and what can be done to address them.

High healthcare costs in Oregon have a significant impact on patients. Related patient out-of-pocket costs, such as deductibles and user fees, have increased along with overall costs. For example, the average deductible for a single person in Oregon was $1,958.[1] in 2019 and has grown 51% since 2013. And due to rising prices and cost-sharing policies, people with commercial health insurance often bear a higher financial burden than those with Medicare.

The report notes that according to the Oregon Health Insurance Survey, nearly half (49.3%) of Oregonians receive their health insurance from an employer-sponsored private health care plan. [2] Nationally, among the privately insured, hospital care accounts for 36% of all health expenditure.[3]

“Only a few states conduct this kind of in-depth health care pricing analysis,” said Rachel Block, Program Officer, Peterson-Milbank Sustainable Health Care Costs Program. “We have data at the national level showing these disparities, but they have to go down to the local level to be actionable. Variations between healthcare markets can mean hundreds of millions of dollars in additional healthcare costs. We also need a better explanation of why prices differ so much for the same services. Understanding the realities of healthcare cost drivers, including price variation, is the first and best step to lowering the cost of healthcare. Congratulations to Oregon for reaching this vital milestone, which will help the state meet its goal for health care cost growth.

“Truly understanding the price and cost nuances in the healthcare system is a significant step in disrupting ever-rising healthcare costs,” said Maureen Hensley-Quinn, senior program director of the National Academy for State Health Policy. “We are delighted with the Oregon report and support all states in analyzing healthcare costs and sharing the results publicly. This kind of analysis — leveraging the state’s own data from its database of all payors and all claims — is critically important to understanding the state’s otherwise opaque costs. We now have a much clearer understanding of how hospital prices change in Oregon depending on who pays.

Price disparities in the report translate to an additional $221 million paid by commercial insurance companies above Medicare’s FFS rate for the inpatient procedures examined in this report, and an additional $400 million paid for outpatient procedures.

“The better our data is on the real drivers of healthcare costs, the better our collective ability to deal with them. You can’t solve what you can’t analyze,” Vandehey added. “We believe this type of analysis can help hospitals, payers and employers identify cost containment opportunities to meet Oregon’s cost growth goal.”

For this report, the OHA analyzed 2019 state All Payer All Claims (APAC) data and derived the median amounts paid for 39 inpatient procedures and 86 outpatient procedures for the commercial insurance market and the Medicare fee-for-service market. The amounts paid for the procedures were then weighted by frequency to create an overall weighted average amount paid for inpatient and outpatient services in the fee-for-service commercial and Medicare markets.

Data from this report, commercial prices and percentage of Medicare payments for specific inpatient and outpatient hospital procedures, can be explored in this online dashboard.

Since 2015, the OHA has reported annually on the median amount paid by private insurance plans for the most common inpatient and outpatient services, resulting in the Oregon Hospital Payments Report. . These data can be accessed here: https://www.oregon.gov/oha/HPA/ANALYTICS/Pages/Hospital-Reports.aspx