Aug 7, 2023 - Health

Why insurers are paying double for the same procedure in the same hospital

Illustration of a hospital bed with a price tag.

Illustration: Aïda Amer/Axios

Hospitals charge commercial health plans two to three times more than what they charge the same insurer's Medicare Advantage plans for the same procedure, a new study in Health Affairs found.

Why it matters: While it's well established that private plans are typically charged more than Medicare, this study leverages the latest available pricing data to shed light on differing dynamics between the commercial and Medicare Advantage markets.

What they found: The median commercial prices for 46 procedures and services offered in 2022 were 1.8 to 2.7 times more expensive than Medicare Advantage prices.

  • The largest price gap was in surgery and medicine: The median commercial price was $1,702, while the Medicare Advantage median price was $928.
  • The larger price ratios were found among larger, system-affiliated hospitals and teaching hospitals, as well as large national insurers, the study found. The study authors noted the insurer finding was surprising since larger insurer market power usually means lower prices. They theorized that the plans may not be pressing hospitals harder on commercial prices to avoid the risk of being shut out of the profitable Medicare Advantage market.
  • Regionally, researchers found the largest ratios in the Southeast and the lowest ratios in the Pacific Northwest and Midwest.

Go deeper: This is one of the first studies to pinpoint price differences between types of health plans from the same insurer and same provider, due in part to the hospital price transparency law that took affect in 2021.

Yes, but: Not all hospitals are reporting data reliably.

  • Study authors used information from 2,434 of 4,331 hospitals with disclosed prices due to potential inaccuracies in their data.
  • Independent and rural hospitals are underrepresented in the study, and researchers cautioned generalizing findings to these facilities.

What's next: "The large price gap between commercial and MA prices within an insurer reveals the pricing consequences of differing incentives across markets," the study authors wrote.

  • Since higher commercial pricing financially affects employers, employees and their dependents, the authors recommend further study of "whether these competing incentives among major insurers affect the prices paid by commercial plans."
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