Analysis Finds Closing Gap In Rates Between Medicare And Private Insurers Could Greatly Reduce Health Care Spending

By Consumers For Quality Care, on April 1, 2021

Health care spending per person in the U.S. is nearly double the average amount spent by other wealthy countries, but there is no clear evidence that the quality of care is also proportionately higher.

Research shows that the gap in prices paid by private insurers and those paid by Medicare is growing. Reducing this gap could ease the financial burden of health care costs for both employers and employees. However, it would also reduce revenue for hospitals and health care providers, with uncertain effects on quality of care.

Analysis from the Kaiser Family Foundation found that total health care spending for privately insured Americans would be an estimated $352 billion, or 41 percent lower in 2021 if insurers could reimburse health care providers at Medicare rates. Forty-five percent of the reduction in spending would come from outpatient services, whereas 27 percent would come from inpatient services and 14 percent from physician office visits.

The model did not take into account potential effects on supply of services, quality of health care, tax obligations, or the change on the federal budget.