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KFF Analysis of Hospital Payments Finds Private Insurance Payment Rates Higher Than Medicare Rates

A Kaiser Family Foundation (KFF) issue brief analyzed hospital payments paid by private payers and by Medicare for a selection of inpatient services, including services requiring similar inpatient treatments for COVID-19. They found private insurance payment rates were between 1.6 and 2.5 times higher than Medicare rates, with some variation among the ten DRGs included in their analysis.

Data was analyzed from the IBM MarketScan Commercial Claims and Encounters Database and the Medicare Provider Payment and Utilization Data public use files for 2014 to 2017. For each of these services, the average payments made by private payers and Medicare were compared, showing the 75th and 25th percentile in Medicare and private insurance payments. KFF researchers also examined the growth in average payments paid by private insurers and Medicare, relative to inflation.

Their analysis found:

  • Private insurance payment rates were between 1.6 and 2.5 times higher than Medicare rates, with some variation among the ten DRGs included in their analysis.
  • Private insurance rates varied more widely than Medicare rates.
  • The average private insurance payment rates paid for diagnoses related to COVID-19 increased between 9.3% and 22.4% from 2014 to 2017, much faster than Medicare rates.

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