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Private Insurers to Reap Bulk of Spending on Hospitalized Patient Care


Spending on care of hospitalized patients is expected to pass $1 trillion in 2015, a new high. Thomas Selden, PhD, of the Agency for Healthcare Research and Quality recently asked where that money is likely to go. The answer: private insurers.

Dr. Selden and his colleagues report in Health Affairs this month that in 2012, private insurers’ payment rates for inpatient hospital stays were approximately 75% greater than Medicare’s payment rates, a sharp increase from the differential of approximately 10% percent during the period of 1996 to 2001. “We need to understand who’s paying what,” Dr. Selden says. “It’s the first step to a better understanding of public policy.”

The report found that “the predicted percentage difference between the rates of private insurers and those of Medicare has increased substantially over time.” In 1996, private insurers paid 106.1% of Medicare payment rates, a payment rate difference of 6.1% (95% CI: -3.2, 15.5). The difference climbed to 64.1% (95% CI: 48.3, 80.0) in 2011 and 75.3% (95% CI: 52.0, 98.6) in 2012. Medicaid payment rates averaged approximately 90% of Medicare payment rates throughout the study period.

Dr. Selden is hopeful that stakeholders will use the data his team collected to determine the impetus for the widening gap. He also plans to research whether payment differences affect quality metrics.

“Anytime you’re talking about a trillion dollars, it’s really important when a payment difference opens up of this magnitude,” he adds. “The difference is real … what the policy implications are is for the policy makers to decide.” TH

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