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Comparing Commercial and Medicare Professional Service Prices

Healthcare prices have long been a black box, an unsolvable equation that yields different results if you are an insurance provider, a government program like Medicare or Medicaid, or an individual without insurance. Knowing how much you are going to pay is different for everyone and for each different kind of procedure. But, by and large, the amount that healthcare providers charge commercial insurance companies more than what Medicaid pays for the same service, according to a new report, which drilled down to compare the differences in healthcare prices at state and local levels.

Nationwide, commercial insurance providers pay 122% of rates charged by Medicare, as of 2017, according to data released last month by the Health Care Cost Institute (https://healthcostinstitute.org/hcci-research/comparing-commercial-and-medicare-professional-service-prices).

Only one state -- Alabama -- had commercial insurance prices that were less than Medicare rates; the other 49 states all had commercial insurance prices that were higher than Medicare. Wisconsin was the outlier on the other end of the spectrum, where commercial insurers charged 188% of Medicare rates.

By and large, the difference in why commercial insurers are charged more is because Medicare prices are set administratively, while commercial rates are the result of negotiations between carriers and healthcare providers.

There is a ton of variation across the country and even across individual states when looking at healthcare prices. This only serves to add to the confusion felt by individuals, especially those without health insurance, who are forced to wait for a bill to arrive in the mail to learn how much he or she is going to have to pay for a visit to the doctor or a hospital.

There have been movements at the federal level to try and develop standardized and public pricing so people can be more educated about the true cost of a visit to the doctor or hospital, but hospitals have been fighting against those changes due to the individualized situations for their specific facilities. While the result is that individuals face different prices for the same procedure from one city to the next, or one facility to the next, hospitals legitimately assert that a one-size fits all solution is impossible to implement without significant dangers to medical providers. Nonetheless, this creates significant disparities that will need to be addressed for healthcare coverage to be truly available to everyone.

"Given the disparity between them, policies that tie commercial prices more closely to Medicare rates, could create the opportunity to lower costs," researchers concluded. "Those possible cost savings also indicate the potential for concern among providers whose payments would be reduced."

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