By Ralph Weber
The RAND study almost, kind of, sort of ‘says’ hospitals get paid 254% of Medicare by commercial plans. But does it really? If you read it very carefully, you’ll find something else.
That 254 sentence gets repeated a lot. But it is not quite right.
RAND’s own researcher confirmed to me in writing that the 254% is the allowed amount and not what hospitals actually collect.
That matters because the patient’s deductible, copay, and coinsurance are all inside that number. So are balances that age into bad debt or collections.
Crowe’s data, JAMA’s data, and major hospital system filings all point in the same direction: actual cash realized is probably closer to 190–215% of Medicare.
Which is still high, still a real policy problem, and certainly still worth challenging.
But “254% of Medicare” and “what hospitals get paid” are not the same thing.
If you are benchmarking plan design against RAND, make sure you know which question you are answering.
Words matter in healthcare finance. Especially this one.
Based on 254% of Medicare, and net pay of 190-215% of Medicare, patient share in the form of deductibles and coinsurance is between 15 to 25%. Since most patients can’t or won’t pay their share, hospitals on average accept 190-215% as payment in full. Is that the magic number Reference Based Pricing plans should default to when balance billing issues arise?
