Payment Rate Differences between Private and Public Insurers

Recent research using the Medical Expenditure Panel Survey found that payments to hospitals from private insurers in 2012 were 75 percent greater than Medicare’s for standardized inpatient admissions.  This was a sharp increase from the approximate 10 percent differences observed between 1996 and 2001.  These findings, published in the December 2015 Health Affairs, add to a growing literature on the large differences in hospital payment rates and raise a number of additional questions.  This presentation will review the findings on widening private-public inpatient payment rate differences and report on a range of closely-related research projects underway at the Agency for Healthcare Research and Quality. 

One area of on-going research concerns whether similar payment rate differences have arisen for types of service other than inpatient stays.  One research project in this area examines private-public payment rate differences for standardized outpatient and emergency room visits over time.  Preliminary evidence shows a widening of payment rates similar to that found for inpatient care.  Another related study examines MEPS expenditures for regression discontinuities by type of service at age 65.  Preliminary findings using regression discontinuity are consistent with evidence from the comparisons of standardized visits.  This pattern of widening private-public payment rate differences for hospital-based care does not, however, extend to physician office visits.

Another area of on-going research investigates payment rates for standardized hospital-based events (inpatient, outpatient, and emergency room), comparing payment rates in traditional Medicare versus Medicare Advantage and comparing payment rates in Medicaid fee-for-service versus Medicaid managed care.  In each case, the research uses MEPS data to examine the evolution of payment rate differences over time. 

A third area of research examines whether widening payment rate differences have led to changes in the provision of care.  This study applies a regression discontinuity design to examine changes in resource use and quality of care differentials at age 65 using the Hospital Cost and Utilization Project family of discharge datasets.  Preliminary results for inpatient stays, regarding length of stay and hospital charges, show no differential changes over time in resource use just before and after turning 65.