RAND Corporation 5/17/2002

by Christopher M. Whaley, Brian Briscombe, Rose Kerber, Brenna O’Neill, Aaron Kofner

Related Topics: Employer Sponsored Health Insurance, Health Care Costs, Health Insurance Markets, Medicare

Key Findings

• Some states (Hawaii, Arkansas, and Washington) had relative prices below 175 percent of Medicare prices, while other states (Florida, West Virginia, and South Carolina) had relative prices that were at or above 310 percent of Medicare prices.
• In 2020, across all hospital inpatient and outpatient services (including both facility and related professional charges), employers and private insurers paid 224 percent of what Medicare would have paid for the same services at the same facilities.
• The 224 percent total for 2020 is a reduction from the 247 percent figure reported for 2018 in the previous study owing to an increase in the volume of claims from states with prices below the previous mean price.
• Among the common data contributors in this round and the previous round, 2020 prices averaged 252 percent of Medicare, which is similar to the 247 percent relative price reported in the previous round for 2018.
• Prices for common outpatient services performed in ambulatory surgery centers (ASCs) averaged 162 percent of Medicare payments, but if paid using Medicare, payment rates for hospital outpatient departments (HOPDs) would have averaged 117 percent of Medicare.
• Although relative prices are lower for ASC claims priced according to HOPD rules, HOPD prices are higher than ASC prices.
• Very little variation in prices is explained by each hospital’s share of patients covered by Medicare or Medicaid; a larger portion of price variation is explained by hospital market power.
• Prices for COVID-19 hospitalization were similar to prices for overall inpatient admissions and averaged 241 percent of Medicare.

Participants

• self-insured employers that chose to participate in the study and that provided claims data for their enrollees
• state-based all-payer claims databases from Arkansas, Delaware, Colorado, Connecticut, Maine, New Hampshire, Oregon, Rhode Island, Utah, Vermont, and Washington
• health plans that chose to participate.

Selected Exhibits

Contents

1. Background …………………………………………………………………………………………………………………. 1
   Employers Bear Responsibility for Health Care Costs but Have Limited Access to Useful
   Information on Hospital Prices …………………………………………………………………………………………….. 1
   Scope and Contribution of the Study ………………………………………………………………………………………….. 3
2. Data and Methods ………………………………………………………………………………………………………… 5
   Data Sources ……………………………………………………………………………………………………………………………. 5
   Methods ………………………………………………………………………………………………………………………………….. 7
3. Findings ……………………………………………………………………………………………………………………. 11
   Study Sample …………………………………………………………………………………………………………………………. 11
   Trends in Hospital Relative Prices ……………………………………………………………………………………………. 11
   Relative Prices, Overall and by State ………………………………………………………………………………………… 12
   Prices and Quality ………………………………………………………………………………………………………………….. 15
   Prices and Patient Composition ………………………………………………………………………………………………… 17
   Prices and Market Share ………………………………………………………………………………………………………….. 19
   Prices for COVID-19 Hospitalizations ……………………………………………………………………………………… 19
   Price Differences Between Hospital and Nonhospital Facilities ……………………………………………………. 20
4. Conclusion ………………………………………………………………………………………………………………… 24
   Appendix A. Background on Hospital Markets and Pricing ………………………………………………… 26
   Abbreviations ……………………………………………………………………………………………………………….. 35
   References ……………………………………………………………………………………………………………………. 36

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