The reimbursement rate gap widens for inpatient hospital care

There was once litle difference between what hospitals received to care for Medicare patients and those with private sector insurance. But times change--and so have those rates, according to a new study in the journal Health Affairs.

The difference between the standardized payment rates for private payers and Medicare was about 10 percent between 1996 and 2001. But in the intervening years the gap has widened dramatically. Private insurers paid hospitals about 75 percent more than Medicare for the same services in 2012.

Hospital chargemasters--which often bear little relation to what a public or private payer pays for care--have risen dramatically in recent years. Even charges for fairly simple maladies have zoomed upward. For example, charges to treat chest pain rose 10 percent nationwide between 2011 and 2012, far higher than the national rate of inflation. Some individual hospitals raised their chargemaster prices by more than double to treat irregular heartbeats, or more than 70 percent to treat urinary tract and kidney infections.

Yet at the same time, many institutions have insisted that their chargemaster prices bear little relation to the cost of delivering healthcare services. 

The study, conducted by researchers with RAND Corp. and the Agency for Health Research and Quality, did not delve into the causes for such a wide divergence. However, it suggested that capping payments to hospitals from private payers could be a long-term fiscal solution.

"Our findings can offer insights into policy prescriptions, including the recent recommendation to cap private insurance payments at 125 percent of Medicare rates," the researchers state. "Our findings suggest that such a cap would affect far more than just the most egregious cases."

To learn more:
- read the study