Study: Rates charged by hospitals to private insurers vastly outpace Medicare, Medicaid rates

stethoscope, coins and calculator
A new study found private payment rates for hospital stays grew rapidly from 1996 to 2012 but leveled off from 2012 to 2016. (Getty/mckare)

Hospital payment rates from private insurers have grown much faster compared to rates paid by Medicare and Medicaid, according to a new study that comes at a time when Washington is considering how to rein in healthcare costs.

The study, published in the journal Health Affairs, looks at payments for inpatient hospital stays, emergency department visits and outpatient care from 1996 to 2016. The authors found that private charges rose four to five times the rate Medicare pays before eventually leveling off or slightly declining.

“Although payment for most hospital patients is set through negotiation with private insurers or set administratively by public payers, tracking the rapid increases in charges remains highly relevant for the national debate over surprise billing and out-of-network care,” the study said.

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The study used data from the Medical Expenditure Panel Survey run by the Agency for Healthcare Research and Quality that surveys families, individuals, providers and employers on healthcare costs. Data showed private payment rates rose significantly from 1996 to 2012.

For instance, in 2000, private insurer payment rates for emergency department visits were, on average, roughly 140% above Medicare’s payment rate. In 2012, that figure rose to nearly 200%.

Researchers found that payment rates for all three payment types grew rapidly.

“For inpatient stays of all payment types, standardized charges rose from 170% of standardized Medicare payment rates in 1996 to a peak of 411.1% in 2012,” the study said.

However, starting in 2012, the payment rates for private insurance started to level off or modestly decline.

For example, a private insurer’s payment rates for an average inpatient hospital stay was 66% greater than Medicare’s payment rate in 2013. But in 2016, it was only 50% greater than Medicare, the study said.

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Researchers didn’t delve into the reasons for the cause of the gap or why payment rates for private payers leveled off from 2012 to 2016. “More research is needed into not only the causes of rapid private insurance payment increases but also the consequences of those differences,” the study said.

The study comes as Congress is considering how to handle surprise medical bills that occur from out-of-network care. The Trump administration is also working to address high prices by requiring hospitals and insurers to divulge more information on rates for shoppable services.

Several Democratic presidential contenders are also endorsing a move to "Medicare for All" that would do away with private insurance and rely on a government-run, single-payer healthcare system.

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