RAND Study Confirms Higher Reimbursement from Private Payers

May 15, 2024
Per a new RAND hospital pricing report, in 2022, hospitals charged private insurers 2.5 to 3 times more than Medicare would have paid

According to a new RAND report, prices paid to hospitals during 2022 by employers and private insurers averaged 254 percent of what Medicare would have paid. Research organization RAND stated in a press release on May 13 that there is a wide price variation among states. RAND concluded that while some states had relative prices under 200 percent of Medicare, other states had relative prices above 300 percent of Medicare.

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

“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,” director of Rand Health Care, Peter S. Hussey, said in a statement.

The American Hospital Association (AHA) questioned the findings of the RAND report. In a May 13 press release, group vice president for public policy Molly Smith said, “In what is becoming an all too familiar pattern, the RAND Corporation’s latest hospital price report oversells and underwhelms. Their analysis…still represents less than 2 percent of overall hospital spending.”

Smith claimed that RAND makes an “apples-to-oranges comparison.” “In addition to the ongoing flaw of relying on a self-selected sample of data, their analysis is suspiciously silent on the hidden influence of commercial insurers in driving up healthcare costs for patients,” Smith remarked.

RAND reminded readers, "Spending on hospital services accounted for 42 percent of total U.S. personal healthcare spending for privately insured individuals in 2022.”

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