By Bill Rusteberg
There’s more than one way to skin a cat……………..
Reference Based Pricing plans typically benchmark claims against the Medicare fee schedule. Why not benchmark off the Medicaid fee schedule too?
Did you know that in most states Medicaid reimbursement is expressed as a percentage of the Medicare rate? Yes, that’s right, Medicaid and Reference Based Pricing have something in common. And so, by the way, does Worker Compensation rates. This is why Medicare functions as the mathematical “anchor” for U.S. healthcare pricing.
You can benchmark your medical claims to the (Texas) Medicaid fee schedule here.
What percentage of Medicaid equals to 100% of Medicare? The relationship is typically linear, with Medicaid payment roughly 60–80% of Medicare, though the exact percentage varies widely by state, service type, and provider class.
In self-funded employer plans and reference-based pricing arrangements, reimbursement is often expressed relative to Medicare:
| Payment Model | Typical Rate |
|---|---|
| Medicaid equivalent | 60–80% Medicare |
| Medicare-based RBP | 120–180% Medicare |
| Commercial PPO | 250–400% Medicare |
The mathematical relationship between Medicare, Medicaid, and commercial rates creates the “cost shift” driving employer premiums. That relationship is often eye-opening for self-funded plans.
Rough rule of thumb: 166% of Medicaid = 100% of Medicare. Most Reference Based Pricing plans in Texas pay a minimum of 120% of Medicare which averages out to 200% of Medicaid.
Hospital Administrator: Why would I accept 120% of Medicare when Blue Cross pays me 350%?
Plan Sponsor: Because you can’t fool all of the people all of the time, something I would never do, pinky promise! But I’ll tell you what……If the magic number is 350% I’ll increase my offer. I’ll pay you 350% of something tied to a percentage of Medicare too! (that’s 210% of Medicare, wink, wink).
Hospital Administrator: Ok, but don’t tell anyone!
