Wednesday, April 17, 2019

The Cost of Hospital Care is Much Higher for those with Employer-Provided Coverage

When you go to the hospital, what you pay is based on what your insurance covers. This raises the question, how do insurers determine what a hospital is paid? On one end there is the chargemaster amount, the list price for services that hospitals are now required to post. On the other end, there is what Medicare pays. Traditionally insurers have negotiated discounts from the chargemaster prices, but that's starting to change. Employers are banding together to force insurers to negotiate up from Medicare instead of down from the chargemaster.

A group of self-insured employers in Indiana commissioned Rand to conduct a study that would provide useful information about the prices they are paying for health care services. The study showed that what employers paid varied wildly--200 to 600 percent over what Medicare reimburses. This is not a question of good hospitals charging more. It's poor hospitals charging too much. The amount considered appropriate as a percentage of Medicare varies. I've heard anywhere from 120 percent to 200 percent of what Medicare reimburses deemed acceptable. The Rand study was so informative that it has been expanded to include 22 states, and the results are due to be announced next month.

Ideally, this pricing information would be used in conjunction with quality data. This raises another issue where employers need to press insurance companies. I've encouraged people to use Leapfrog ratings to obtain care from the safest hospitals. I want to take the next step and build a financial incentive into the plan design for doing this, but the network contracts insurers have with hospitals prevent this. Here is the response I received from UHC.

"Contractual agreements with UHC requires contracted providers of the same service type to receive the same benefits. That is, one contracted hospital cannot fall into a higher benefit level than other contracted hospitals. All contracted hospitals must receive the highest level of member benefits."
49% of American's get their health insurance at work, and most are happy with it. The healthcare industry has a massive lobbying force. There are all kinds of special interests groups exerting their influence in health policy discussions, but employers rarely engage. I encourage organizations to join their local business coalitions and engage in the discussion. You can identify active local groups on the National Alliance of Healthcare Purchaser Coalitions website. 

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