Hospital charges are driving higher payments

Hospital charges are on their way up, driving up private payments that are already significantly higher than public payments, according to a new study published in Health Affairs. However, the widening gap between private and public payments appears to be slowing down.

Hospital care accounts make up one-third of total U.S. healthcare spending, and previous research has shown that private payments were 66% higher than Medicare rates in 2013 and 50% higher in 2016. In fact, a previous study found the difference between private insurance rates and Medicare in hospitals jumped from under 10% in 2000 to 75% in 2012.

The latest study­­––by the same researcher Thomas Selden, director of the division of research and modeling from the Center for Financing, Access and Cost Trends at the Agency for Healthcare Research and Quality––updates those findings through 2016.

Selden analyzed data from the nationally representative household survey from the Agency for Healthcare Research and Quality, MEPS, and examined payments for nonmaternity events for adults 19 and older, including 48,388 inpatient stays, 85,873 ED visits and 236,516 outpatient visits.

Standardized rates during the study period (2012-2016) for all three visit types continued to increase, though widening of the private-public payment differences appeared to slow. Selden noted the gap may have peaked between 2010 and 2012.

“For all three event types, the peak ratio of private to Medicare payment rates occurred in 2012,” Selden wrote.

More importantly, however, was the fact that hospital charges overall grew much faster.

“Although payments for privately insured patients in general grew at a more rapid pace relative to those for Medicare over the study period, hospital charges for all payment types grew even faster,” Selden wrote.

The findings add to the body of works that already show private-public payment discrepancies, but also underscore how hospital charges are driving up payments all around.

“Although payment for most hospital patients is set through negotiation with private insurers or set administratively by public payers, tracking the rapid increases in charges remains highly relevant for the national debate over surprise billing and out-of-network care, as well as for public policy regarding bills faced by the uninsured and some third-party payers,” Selden wrote.