Medicare Rate Reimbursement Dramatically Reduces Healthcare Spending
Monday, March 15th, 2021

According to a recent study, if private payers reimbursed hospitals at Medicare rates, healthcare costs will be reduced by more than $300 billion this year. Data shows overall healthcare spending for the privately insured population in 2021 will drop by 41% from its current estimated total of just over $850 billion. Furthermore, employer payments to employee premiums and patient out-of-pocket spending will each be reduced by hundreds of billions of dollars.

Reduced reimbursements for outpatient treatment, where the gap in reimbursement rates between private payers and Medicare is the greatest, are responsible for almost half of the drop in healthcare costs, according to researchers.

In the meantime, reimbursements for hospital inpatient treatment are expected to account for nearly 30% of the overall reduction in healthcare costs, while reimbursements for outpatient office visits are expected to make up 14%.

In comparison to comparable nations, healthcare spending in the United States is almost twice as high per resident, with part of the rise due to greater payment rates negotiated by hospitals and other providers with private payers.

The gap between private payer reimbursement rates and Medicare reimbursement rates has widened through time. Medicare per capita spending rose at a more drawn-out rate than private payer spending between 2010 to 2019, according to research, rising at an average yearly rate of just over 1.5 percent versus almost 4 percent.

Higher rates and deductibles for employer-sponsored insurance plans resulted from the increased expenditure.

When opposed to current measures such as market neutrality, reducing private payer payment to Medicare premiums is the most efficient way to minimize healthcare costs.

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