Prices paid to hospitals by employers and private insurers in 2022 were found to be significantly higher than what Medicare would have paid, according to a new RAND report. The study revealed that on average, prices for both inpatient and outpatient services were 254% of Medicare rates, with wide variations among states.
Some states, such as Arkansas, Iowa, Massachusetts, Michigan, and Mississippi, had prices below 200% of Medicare, while others like California, Florida, Georgia, New York, South Carolina, West Virginia, and Wisconsin had prices above 300% of Medicare.
The report highlighted the impact of these high prices on healthcare spending, noting that hospital services accounted for 42% of total U.S. personal healthcare spending for privately insured individuals in 2022. Hospital price increases were identified as key drivers of growth in per capita spending among the 160 million Americans with private insurance.
Despite recent federal policies requiring hospitals to post prices for certain services and insurers to disclose negotiated rates, many have not complied. The study also found that prices for common outpatient services in ambulatory surgical centers averaged 170% of Medicare payments.
Researchers emphasized the importance of the report in providing employers with tools to make informed healthcare purchasing decisions and aiding policymakers in addressing rising healthcare costs. The study, based on data from over 4,000 hospitals in 49 states, sheds light on the significant price variations across the country and the impact of hospital market power on pricing.