Employers Pay 224% Of Medicare Prices For Hospital Services

Employers pay 224% of Medicare prices for hospital services | BenefitsPRO

Source: BenefitsPRO, by Scott Wooldridge

Employer-sponsored health plans paid on average 224% of what Medicare paid to hospitals for the same services at the same facilities, according to a new study from RAND Corporation. The report covers billing for hospital inpatient and outpatient services in 2020.

The study said that there were significant variances in prices across states or geographic areas and added that the difference in cost seemed to be linked to hospital market share rather than hospitals’ share of Medicare and Medicaid patients.

The researchers found that in Hawaii, Arkansas, and Washington, relative prices were under 175% of Medicare, while other in states, such as Florida, West Virginia, and South Carolina, relative prices were at or above 310% of Medicare.

In addition, the study found that prices for COVID-19 hospitalization were similar to prices for overall inpatient admissions and averaged 241% of what was paid for Medicare patients.

“Employers can use this report to become better-informed purchasers of health benefits,” said Christopher Whaley, the study’s lead author and a policy researcher at RAND, a nonprofit research organization. “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 health care spending.”

Cost variation: a “defining characteristic” of US health care

The researchers described the wide variation in prices paid for medical services as “a defining characteristic of the U.S. health care system.”

In 2019, the study said, spending on hospital services accounted for 37% of total health care spending for privately insured Americans and came to approximately $434 billion. “Hospital price increases are key drivers of growth in per capita spending among the privately insured,” the study added.

RAND researchers found the difference between employer prices and Medicare prices was actually a bit lower since a previous study in 2018, when employers paid 247% of Medicare costs. The researchers said the change was because of an increase in claims among states that generally pay lower rates for hospital costs.

Transparency in pricing has been a challenge for the health care industry. Despite efforts by both providers and government regulators to create more transparency, both employers and consumers lack useful information on pricing. And the public data that does exist has gaps, due in part to the fact that many hospitals have not yet complied with recent regulatory requirements.

An Indiana case study: employer pressure lowered prices

The study concludes by looking at efforts in some states to address relatively high hospital prices. In Indiana, employers in the Fort Wayne area were able to prompt price changes at the Parkview Health System in that community, which the RAND study had identified as having some of the highest prices in the country.

“Equipped with information on negotiated prices, employers were able to place pressure on a large hospital system and TPAs to achieve lower prices for their workforce,” the study said. “Other employer and policymaker pressures in Indiana led the Indiana University Health system to announce plans to reduce prices to the national average rate.”

Hospital association response: “Unfounded conclusions”

The American Hospital Association (AHA), however, quickly released a statement saying the RAND conclusions were an over-reach and unfounded.

“The report looks at claims for just 2.2% of overall hospital spending, which, no matter how you slice it, represents a small share of what actually happens in hospitals and health systems in the real world,” said AHA President and CEO Rick Pollack. “Researchers should expect variation in the cost of delivering services across the wide range of U.S. hospitals – from rural critical access hospitals to large academic medical centers. Tellingly, when RAND added more claims as compared to previous versions of this report, the average price for hospital services declined.”

Employers Pay Hospitals Billions More Than Medicare

How Much More Than Medicare Do Private Insurers Pay? A Review of the  Literature | KFF

Source: Axios, by Adriel Bettelheim and Caitlin Owens

Employers and private insurance plans in 2020 paid hospitals 224% of what Medicare paid for the same services, with rates for inpatient and outpatient care varying widely from site to site, a new report from RAND finds.

The intrigue: The report found that hospital prices had no significant correlation with hospitals’ share of Medicare and Medicaid patients, which hospitals say factor into private rates. Price did positively correlate with hospital market share.

Why it matters: Hospitals account for about 37% of health spending for the privately insured — and even people who don’t use hospital services foot some of the bill through their premiums.

The big picture: Annual per-person spending growth for workplace health coverage has exceeded spending growth for government programs in nine of the past 13 years, largely because enrollment and demand for services among the commercially insured has barely changed.

  • * The divergence in pricing has been linked to mergers and acquisitions, affiliation agreements and other consolidation that increases hospitals’ leverage.
  • * In 2021, the average premium cost of an employer-sponsored family plan was more than $22,000, an increase of 47% from 2011, according to the Kaiser Family Foundation.

What they found: The report draws on medical claims data from employers and state databases from 2018 to 2020 covering 4,102 hospitals and 4,091 ambulatory surgical centers that account for $78.8 billion of spending.

  • * States like Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while others including Florida, West Virginia and South Carolina had prices at or above 310% of Medicare levels.
  • * In 2020, COVID-19 inpatient hospitalizations averaged 241% of Medicare, which is similar to the relative price for all inpatient procedures.
  • * Prices for common outpatient services performed in ambulatory surgical centers such as imaging and colonoscopies averaged 162% of Medicare payments. However, Medicare pays the centers less than it pays hospital outpatient departments for the same services, the study notes, and the ratio would be lower if centers were paid the same way.
  • * Medicare per-procedure payments to hospital outpatient departments were 2.1 times higher than payments to ambulatory surgical centers and commercial payments were 2.6 times larger, the study found.
  • * If the same providers were paid Medicare rates for the same services, employers and private plans would have saved $49.9 billion, researchers said.

The other side: Hospitals say Medicare reimbursement rates are too low, so they have to charge privately insured patients more to make ends meet. The pandemic has also disrupted many hospital business models — for example, by forcing the cancellation of elective procedures.

The bottom line: Health costs are likely to keep rising for those with private insurance as employers use higher deductibles, copays and coinsurance to offset some of the rising costs.

  • * While employers back reforming how workplace health care is paid for, they don’t agree on many of the details or how significant changes would be.
  • * The more information about pricing disparities that becomes public, the more likely it is that pressure on hospitals to justify their prices will build.

Worker Pay and Benefits Grow at Record Pace, Pressuring Inflation

Worker Pay and Benefits Grow at Record Pace, Pressuring Inflation - WSJ

Source: Program Business, by Neilson

Compensation for American workers increased rapidly in the first quarter, as a tight labor market put more money in workers’ pockets while keeping inflation under control.

Without adjusting for seasonality, business and government employers spent 4.5 percent more on worker costs in the first quarter compared to the same period a year ago, according to the Labor Department on Friday. That was the fastest increase since records began in 2001, and it surpassed 4.0 percent annual growth in the fourth quarter.

On a quarterly basis, compensation for workers increased by 1.4 percent in the first quarter, compared to a 1.0 percent increase in the fourth quarter. The expansion reflected higher wages, salaries, and benefits.

This has allowed households to continue spending and supporting the economy. The Commerce Department reported on Friday that consumer spending increased by 1.1 percent in March. Americans increased their spending on services such as travel and dining, as well as goods such as gasoline and food, demonstrating a willingness to spend despite the highest inflation in four decades.

Workers’ large pay raises reflect their increased bargaining power, but they also threaten to keep inflation high. Economists believe that companies must raise prices to compensate for higher labor costs.

Consumer prices rose 6.6 percent year on year in March, up from the revised 6.3 percent increase in February and the fastest rate since 1982, according to the Commerce Department on Friday.

Workers at Pinches Tacos, a family-owned Mexican restaurant chain with seven locations in Los Angeles and Las Vegas, recently received wage increases. Miguel Anaya, president of Pinches, stated that he increased the pay for a cook from $16 to $20 per hour in order to keep the employee from leaving for another job.

Mr. Anaya added that in a job market where poaching is rampant and labor is scarce, he is increasingly having to offer higher wages to retain kitchen staff. Meanwhile, prices for ingredients such as poultry and pork have risen rapidly.

Due to higher labor and food costs, Pinches increased menu prices for burritos and tacos by about 5% on average at the start of this year, after increasing them by the same amount last summer, according to Mr. Anaya.

“The price for everything, including labor, was just too much for us to bear,” he explained. “There’s only so long you can hold on.”

The wage-price dynamics have implications for the Federal Reserve, which raised its benchmark rate by a quarter-point from near zero in March to tame inflation. More increases are likely to follow, according to central bank officials who will meet next week to discuss their next steps.

“The Fed is closely monitoring the data for signs of a wage-price spiral,” said Rubeela Farooqi, High Frequency Economics’ chief U.S. economist. “These readings, which show no signs of easing, will worry policymakers as they make monetary policy decisions in an environment where the labor market is tight and prices are at a 40-year high.”

Employer demand for workers far outnumbers the available pool of job seekers. According to the Labor Department, there were 11.3 million job openings in February, compared to 6.3 million Americans who were unemployed but looking for work.

Due to the difficulty of recruiting workers in such a tight labor market, employers have been forced to not only raise wages, but also to entice workers with more robust benefits. Benefits increased by 1.8 percent in the first quarter, the fastest quarterly increase since 2004, with gains in management, sales, and manufacturing jobs.

Companies say that higher compensation costs are one of the factors driving them to raise prices on goods and services. They also point to supply-chain disruptions, high energy and commodity prices pushed up by the Ukraine conflict, and strong consumer demand.

Rising prices are reducing wage increases for workers. Adjusted for inflation, private-sector wages and salaries fell 3.3 percent year on year in the first quarter. Restaurant and bar workers defied the trend, with pay increases in the lower-wage sector slightly outpacing inflation, according to a Labor Department report released on Friday.

The high rate of job switching is an important factor that could keep wage gains high. Workers who change jobs typically receive larger pay raises and put pressure on employers to raise pay for current employees.

Some companies believe that increasing pay will be necessary in the future.

“Labor continues to be an area with the greatest inflationary pressure in both professional driver and nondriver salary wages and benefits, and we expect that trend to continue throughout the remainder of the year,” J.B. Hunt’s chief financial officer, John Kuhlow, said on an earnings call last week.

However, some economists believe that as pandemic savings dwindle and Covid-19 case counts fall, more Americans are returning to the labor force. As a result, more workers will be available to fill openings, relieving employers of the need to pay higher wages.

“The labor-force participation rate has begun to rise in earnest over the last several months,” said Ben Herzon, executive director at IHS Markit. “If that continues, it will help to limit the rate of wage growth.”

RSVP Party Rentals, a Las Vegas-based events company, is seeing signs that wage pressures are easing as demand for its services has recovered from earlier in the pandemic, according to President Brad Smithers. The company had to scramble to hire dozens of people. It now has around 70 employees, up from eight earlier in the pandemic and similar to pre-pandemic levels, according to Mr. Smithers.

The majority of the jobs are in logistics—warehouse work, delivery, and event setup and cleanup—but the company has also added office workers. “It’s becoming more difficult to find truck drivers.” “They are in high demand,” he explained.

He estimates that his labor costs are 5% higher than a year ago, but he believes the upward pressure is easing.

“Corporate events are down, and private events are up a little bit,” Mr. Smithers explained. “Some of those guys who worked corporate are coming to us for work.” “It’s gotten better—a good number of people are coming to us for work.”

Some States Pay Twice the Price for Health Care

Some states pay more than double of what other states pay for health care among the commercially insured, according to a report by the Health Care Cost Institute (HCCI). Some price variation is due to differences in wages or rent, but other variation is due to differences in market dynamics, such as a lack of transparency, market power, or the availability of alternative treatments. Alaska has the highest health care prices, followed by Wisconsin, North Dakota, New Hampshire, and Minnesota. In New Hampshire and Wisconsin, over 20% of health care services are twice the national average price. In Arizona, Florida, Maryland, and Tennessee, more than 90% of health care services are priced lower than the national average.

Prices vary more for some health care services. For example, states have similar prices for acupuncture while prices for cataract removal vary significantly. The greatest price variation is for imaging, radiology, and lab tests. Prices for services also vary widely among cities in the same state. For example, prices for knee replacements vary most in California, with a $27,243 average price difference between Riverside ($30,261) and Sacramento ($57,504). Price variation has a substantial affect on health care spending and patients’ cost sharing

How Do We Pay for a Growing Medicare Program?

To keep Medicare’s spending in check, seniors may need to pay a larger share of their healthcare, according to a study by National Center for Policy Analysis (NCPA). The study recommends the following:.
• Raise beneficiary premiums to cover excess cost growth.
• Raise deductibles and copays. Means-tested contributions to health savings accounts (HSAs) by the
federal government could complement the reformed insurance.
• Constrain the federal payment rate by procedure and service. Rather than paying the CMS-determined reimbursement to each provider, Medicare would give those amounts to the participants. Over time, a real market would emerge for health care due to seniors’ demand for lower prices.
• Have premium support payments rise at the same rate as per-capita GDP. This would offer a significant level of individual choice and payment responsibility while limiting the role of CMS in the Medicare market.

Consumers Who Don’t Get Subsidies Pay Substantially More

Health insurance consumers without subsidies who shopped through eHealth paid average premiums of $189 a month or $2,268 a year. Those without subsidies are also more likely to chose lower-tier plans, resulting in deductibles that may be over $4,000 a year. Carrie McLean, eHealth director of Customer Care said, “As many as 40% of Americans shopping for coverage on their own will not be eligible for government subsidies. And if you do get a subsidy, unexpected increases in your household income or court challenges to the Affordable Care Act may still call your subsidy dollars into question. Without subsidies, the…cost of health insurance could increase substantially for many Americans.” eHealth used health plan selection and cost data from its May 2014 Health Insurance Price Index report. The study found the following:
• The average premium for an individual plan, across all metal levels, was $346 a month before subsidies were applied and $82 a month after subsidies were applied.
• The average premium for an individual plan was $271 a month across all metal levels.
• Individual consumers with bronze plans paid an average of $68 (after subsidies) toward their monthly premiums; those with silver plans paid an average of $69; those with gold plans paid an average of $208; and those with platinum plans paid an average of $220.
• Individual consumers with bronze plans paid an average of $259 toward their monthly premiums; those with silver plans paid an average of $328; those with gold plans paid and average of $353; and those with platinum plans paid an average of $411.
• Sixty-nine percent of individual consumers chose plans with premiums of $100 or less a month after subsidies were applied. Forty-six percent had premiums of $50 or less.
• Sixty-one percent of individual consumers chose health insurance plans with monthly premiums of $200 or more. For more information, visit www.eHealth.com/affordable-care-act.

Many Americans Would Rather Pay the Fine Than Get Coverage

Thirty-eight percent of Americans would rather pay a fine than buy health insurance, according to a survey by insuranceQuotes.com. The survey reveals the following:
• 65% of Americans from 18 to 29 would buy health insurance versus 57% of Americans 30 and older.
• 78% of African Americans would buy health insurance versus 61% of Hispanics and 56% of Caucasians.
• 74% of Democrats would buy health insurance versus 40% of Republicans and 56% of independents.

The results reflect Americans’ responses to a hypothetical scenario (a 45-year-old who earns $50,000 a year). A typical health plan would cost this person $3,000 a year. If this person did not buy health insurance, the fine would be $400.

Laura Adams, insuranceQuotes.com’s senior analyst said, “One of the key questions surrounding the Affordable Care Act is whether young Americans — especially healthy young Americans — will sign up for health insurance. This research sheds a positive light on that segment of the population, but it’s concerning that about three in 10 Americans still don’t know about the possible fines.”

Most Americans are confused about the penalty amounts. The penalty would be $200 for a person who earns $30,000 a year. Only 21% of Americans who know that uninsured people will be fined correctly pegged the amount at $100 to$250 (38% overestimated and 36% underestimated). The penalty would be $650 for a person who earns $75,000 a year. Only 21% of Americans who know about fines correctly pegged the amount at $500 to $1,000 (46% underestimated and 29% overestimated).

Almost eight in 10 Americans who know about fines incorrectly think that children under the age of 18 are exempt from fines. Six in 10 falsely believe that senior citizens over the age of 65 are exempt. Only 64% correctly said the fine would come from their federal income tax refund. For more information, visithttp://www.insurancequotes.com/health/obamacare-penalty

Last Updated 06/29/2022

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