Health plans

Private health plans paid hospitals 224% more than Medicare in 2020

Hospitals were paid up to 224% more by private health plans and employers than Medicare rates in 2020, according to a recent RAND Corporation study. [1]

The average was true for both inpatient and outpatient services, but prices varied widely by state. For example, some states like Hawaii, Arkansas, and Washington had relative prices below 175% of Medicare, while others like Florida, West Virginia, and South Carolina had relative prices above 310% of Medicare. The study also found that COVID-19 hospitalization prices for inpatient admissions followed a similar pattern, averaging 241% of what Medicare paid for services.

RAND Corporation, a California-based nonprofit global policy think tank, analyzed data from 4,000 hospitals in 49 states from 2018 to 2020 for its study. Maryland was excluded from the study because the state has a system in which privately insured and Medicare beneficiaries pay the same price.

Hospital spending accounted for 37% of total U.S. health care costs in 2019, and hospital prices are the primary driver of per capita spending growth among privately insured, RAND noted.

“Employers can use this report to become more informed purchasers of health benefits,” Christopher Whaley, lead author of the study and policy researcher at RAND, said in a press release. “This work also highlights the levels and variations in hospital prices paid by employers and private insurers, and therefore may help policy makers looking for strategies to reduce health expenditures.”