On the same day that the Congressional Budget Office (CBO) released a report that said 22 million people would lose health insurance if the Senate’s Better Care Reconciliation Act is approved, CBO released two other reports that have flown mostly under the radar.
The other reports compared what private insurance and Medicare fee-for-service (FFS) pay for physician services and also compared what private payers, Medicare FFS and Medicare Advantage plans pay hospitals.
The reports found that private insurers pay much more for physician services than Medicare and Medicare Advantage pays hospitals nearly the same amount on average than Medicare fee-for-services — and much less than private payers.
The widely-publicized CBO report that listed the number of people who may lose insurance threw gasoline on the healthcare debate, but these other two CBO reports are also interesting. Higher physician and hospital payments are great for those entities, but they usually mean higher premiums for plan members.
In the physicians report, CBO analyzed three private payers — Aetna, Humana and UnitedHealthcare — which cover 39 million people across all 50 states. The three payers make up 25% of Americans with employer-based insurance and 50% of Medicare Advantage beneficiaries.
CBO reviewed 21 frequent and costly services. CBO found private insurance pays physicians much more than Medicare, particularly for brain MRIs, intensity-modulated radiation therapy, abdominal MRIs and knee arthroscopy. The highest physician payments for those services were at least 350% higher than Medicare payments. The average for those procedures was more than 200% higher for private payers compared to Medicare.
The report also said private insurers’ physician pay varies greatly and can be “based on physician competition” and "physician-hospital vertical integration.”
CBO also said Medicare Advantage plans don’t charge much more for out-of-network care compared to in-network care. Private payers charge much more for out-of-network care.
In the hospitals report, CBO examined the payment rates for hospital inpatient services for private insurers and Medicare Advantage plans and compared them to Medicare FFS rates. CBO used the same payers in the hospital report.
CBO found the average commercial payment rate for hospital admission was $21,400 in 2013, compared to $11,400 for a Medicare FFS patient, which was slightly more than for a Medicare Advantage patient ($10,700). Private insurance rates were 89% higher on average than Medicare FFS rates, according to CBO.
Medicare Advantage and Medicare FFS payments to hospitals were nearly identical and they were much lower than private payers. Private insurers’ payments to hospitals varied greatly, while Medicare FFS and Medicare Advantage varied much less.
Private insurers prices were about 150% higher than Medicare FFS at the 90th percentile and about 45% higher than FFS at the 10th percentile. Meanwhile, Medicare Advantage was only 6% higher than the average FFS rate at the 90th percentile and only 2% above the 10th percentile.
Physician and hospital payments play a large part in the success of each entity. The finding that private payers give more to doctors and hospitals isn't a surprise. However, how much more private insurers pay doctors and hospitals compared to Medicare and the variation between payers may become part of the healthcare reform debate when the Senate discusses the healthcare reform plan again after the July 4 recess.