Rand Corporation conducted an in-depth study of hospital costs across America and found that, on average, private insurance pays hospitals 247% more than Medicare pays for the same services. (1) Rand\u2019s conclusion is that hospitals are price-gouging.\u00a0 Is that a fair characterization?<\/p>\n
I think not.\u00a0 On the contrary, it has been commonly understood within the benefits community for as long as I remember, that health care providers, including hospitals, charge more to private insurers to offset the low reimbursement from Medicare and the uninsured.\u00a0 There are even some private health providers will not treat patients on Medicare because of the low payments.<\/p>\n
Another question to consider is whether hospitals are making a lot of money.\u00a0 According to the Advisory Board the profit margins of not-for-profit hospitals have ranged from 1.5% to 3.5% in recent years. (2)\u00a0 The \u201cTrue Cost of Health-Care\u201d website indicates that the margins for all hospitals are in the 4% to 8% range. (3) Neither of these profit margin reports suggest price-gouging.<\/p>\n
So, it appears that hospitals are charging an appropriate amount to stay financially viable.\u00a0 This brings to mind the proposal by some to provide \u201cMedicare for All\u201d.\u00a0 \u00a0Could hospitals survive by charging all patients at current Medicare rates?\u00a0 That is questionable.<\/p>\n
(1) https:\/\/www.benefitspro.com\/2020\/09\/18\/rand-stokes-hospital-pricing-transparency-fire-with-new-report\/<\/a><\/p>\n