Gap Between Private Insurance, Medicare, Medicaid Payment Rates is Shrinking

After spiking during 2000 – 2012, the gap between what hospitals charge private insurance companies and what they charge the federal government for Medicaid or Medicare coverage is narrowing, according to a published report.

In 2000, for example, private insurance payment rates for an emergency room visit was 140% of what Medicare’s payment rate was. By 2012, that gap had widened to 200%. For an inpatient stay at a hospital, the standard insurance rate was 170% of Medicare’s rate in 1996 and had ballooned to 411% in 2012.

But, starting in 2012, the gap began to narrow. By 2013, the gap between private insurance and Medicare for an inpatient stay was 66%. By 2016, the gap had shrunk to 50%.

Why such a dramatic reversal? Researchers behind the study aren’t sure.

“More research is needed into not only the causes of rapid private insurance payment increases but also the consequences of those differences,” the researchers wrote in their report.

The objective behind the study was to provide quantitative data that looks at healthcare pricing at a time when many in the country are worried about surprise medical bills and rising health insurance costs.

“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 researchers said.

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