Private health plans paid hospitals 224% more than Medicare in 2020

Hospitals were paid up to 224% more from private health plans and employers than Medicare rates in 2020, according to a recent RAND Corporation study. [1]

The average was true for both inpatient and outpatient services, but prices varied widely by state. For example, some states such as Hawaii, Arkansas and Washington had relative prices under 175% of Medicare, while others such as Florida, West Virginia, and South Carolina had relative prices that exceeded 310% of Medicare. The study also found that COVID-19 hospitalization prices for inpatient admissions followed a similar trend, averaging 241% what Medicare paid for services.

RAND Corporation, an American nonprofit global policy think tank based in California, analyzed data from 4,000 hospitals in 49 states from 2018 to 2020 for its study. Maryland was excluded from the study as the state has a system where the privately insured and Medicare recipients pay the same price.

Hospital spending accounted for 37% of total healthcare costs in the U.S. in 2019, and hospital prices are key growth drivers of per capita spending among the privately insured, RAND noted.

“Employers can use this report to become better-informed purchasers of health benefits,” Christopher Whaley, the study's lead author and a policy researcher at RAND, said in a statement. “This work also highlights the levels and variation in hospital prices paid by employers and private insurers, and thus may help policymakers who may be looking for strategies to curb healthcare spending.”