Reimbursement at Medicare Rates Might Cut Healthcare Spending by $352B

HBI Blog / Reimbursement at Medicare Rates Might Cut Healthcare Spending by $352B

Lowering and matching the rates of private payer reimbursement to that of Medicare might reduce the steadily rising healthcare spending. However, it might also slash the revenue of hospitals and other providers.

According to a new analysis, the overall healthcare spending of the country can be lowered by around $352B in 2021 if the private payers started reimbursing providers at Medicare rates. The currently projected healthcare cost for this year is nearly $859B. If the Medicare reimbursement rates are implemented, it would mean a 41 percent decrease in healthcare cost.

Medicare reimbursement

Apart from that, employer contributions towards employee premiums and patient out-of-pocket spending would also decrease significantly – $194B and $116B respectively, under the above scenario.

However, according to researchers, this scenario might implement decreased revenue for hospitals and other healthcare providers. According to the analysis, such a situation might have uncertain effects on patient care.

Researchers have held hospital outpatient services accountable for around half (45 percent) of the reduction, which has the highest margin of difference between the reimbursement rates among Medicare and private payers. Outpatient services are followed by hospital inpatient services, responsible for around 27 percent of the decrease, and physician office visits at 14 percent.

Healthcare cost in the country is nearly twice as much per person compared to similar countries. The better part of the increase is driven by higher reimbursement rates negotiated by the hospitals and other providers with the private payers.

The difference between private payers and Medicare reimbursement rates has been rising for the past couple of years. Researchers believe that bringing the private rates down is the best way to reduce the healthcare spending of the country, as compared to other existing policies like price transparency.

The overall impact of slashing the rates on the healthcare industry must be taken into account before proceeding further with it. If an alternative is there to stop the revenue loss for hospitals and care providers while keeping the quality of care intact, reducing private rates to match Medicare might open up a new horizon of opportunity.

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