Private insurers spend 14% more on knee surgeries than Medicare

Private insurers are spending 14 percent more than Medicare on knee replacement surgeries and related costs, even though Medicare patients are older and have double the hospital readmission rates.

A research paper from Health Care Incentives Improvement Institute (HCI3) released last week revealed that, on average, private insurers spend $3,200 more per procedure than Medicare, primarily because of higher inpatient stay costs resulting from complications, reported Business Insurance.

A total knee replacement, including the initial hospital stay, related services, readmissions and post-acute care, costs an average of $22,611 for Medicare patients, compared to $25,872 for commercial patients. The HCI3 issue brief also found that average initial stay costs, including the costs of any complications, were $10,870 for Medicare, but $17,292 for private insurers. The average professional services were $10,058 for Medicare and $6,568 for private insurers.

"Every single commercial payer and employer ought to ask themselves why is it that we're paying $1.50 for something the government pays $1 for," study coauthor and HCI3 Executive Director Francois de Brantes said.

He added that the price difference for knee replacements have become even bigger as Medicare has moderated hospitals' attempts to raise prices successfully. Although Medicare sets a specific amount it will pay for the surgeries, private insurers negotiate with hospitals with varying success. But hospitals are more willing to accept Medicare's lower rates because the program represents such a large revenue share, Kaiser Health News reported.

Regardless of whether insurers can temper rising hospital charges, much of the difference in surgery costs comes from potentially avoidable complications. Therefore, de Brantes said, reducing surgery-related complications could save 20 percent of total care costs for Medicare and 10 percent for commercial payers.

To learn more:
- read the HCI3 issue brief (.pdf)
- read the Kaiser Health News article
- see the Business Insurance article