Bolstering Case for Single Payer, Study Shows For-Profit Insurer Plans Pay Hospitals Nearly 250% More Than Medicare

A new study released Friday by the RAND Corporation details the astronomical prices hospital systems across the U.S. charge private insurers and the more than 153 million patients who obtain health coverage through their employers--while Medicare proves to be a far more affordable option.

The findings make the case for expanding the Medicare system to all Americans, one prominent single-payer healthcare advocate said.

"There is no better system of cost control and universal care for employers than Medicare for All," policy analyst Michael Lighty, a leading expert on and organizer for Medicare for All, told Common Dreams.

"If we want to keep a private market in U.S. healthcare, it has to function. It's really not functioning."
--Elizabeth Mitchell, Pacific Business Group on Health

Studying hospital systems in 49 states, RAND found that employers and insurers paid $20 billion more to hospitals between 2016 and 2018 than the government did through Medicare for the same healthcare services.

In hospitals across the country, according to the study, private insurers paid an average of 247% more for services than what hospitals would have received via the Medicare system. In six states, hospitals charge three times more than Medicare if a patient has private insurance, and at the most expensive hospitals, insurers may be charged four times the amount--ultimately leading to a financial strain on the patient.

"Hospitals like this are a tax on their community, harming economic growth and decreasing workers' take-home pay," tweeted philanthropist John Arnold.

"If we want to keep a private market in U.S. healthcare, it has to function," Elizabeth Mitchell, chief executive of the Pacific Business Group on Health told the New York Times. "It's really not functioning."

The Timesreported that the study was likely to bolster the argument for a public option which would compete with for-profit health insurance, ultimately bringing down the cost of care.

Lighty told Common Dreams that the research actually "creates a much stronger argument for Medicare for All than for the public option."

"The primary payment method for hospitals under Medicare for All would be a 'global budget,' which ensures that each facility has the resources to provide patient care for their patient population and service area," Lighty said. "The public option simply introduces another 'plan design' into a system of plans that is causing the problem--the administrative complexity of network definitions and rate setting continues under a public option."

The Times claimed Medicare for All is a far more "controversial" solution than the public option--but both solutions are popular with the U.S. public. A survey by Kaiser Family Foundation in May found that 56% of Americans support Medicare for All, including eight in 10 Democratic voters. A separate poll taken by The Hill/HarrisX in April showed that 69% of respondents believe every American should be covered under the hugely popular Medicare program.

The Times article brings up the frequently-expressed concern of Medicare for All opponents that hospitals would be unable to operate if they are forced to accept Medicare rates and are unable to price their surgeries, overnight stays, and other services at exorbitant rates for insurance companies.

"We cannot survive in that kind of the world," Tom Nickels, an executive vice president at the American Hospital Association (AHA), told the Times. The trade group further pushed back against the RAND Corporation's findings on Friday, saying "the study again perpetuates erroneous suggestions that Medicare payments should be used as a benchmark for private insurers."

Lighty countered that the AHA has "literally no credibility" regarding efforts to keep hospitals running.

"They have been promoting a business model that closes 'unprofitable' hospitals in rural areas and inner cities for over two decades," Lighty told Common Dreams. "In South Carolina, eight hospitals have closed since 2010. Global budgets keep hospitals open, the present system of financing and contracting closes them."