[HN Gopher] US commercial insurers pay 254% of Medicare for the ...
___________________________________________________________________
US commercial insurers pay 254% of Medicare for the same hospital
procedures
Author : rexroad
Score : 51 points
Date : 2026-03-16 17:13 UTC (5 hours ago)
(HTM) web link (github.com)
(TXT) w3m dump (github.com)
| rexroad wrote:
| Author here. The 254% figure comes from RAND Round 5.1. I built a
| Python pipeline on CMS HCRIS cost reports (FY2023, 3,193
| hospitals) to compute cost-to-charge ratios by ownership type.
| The surprising finding: nonprofit hospitals have a median markup
| of 3.96x actual costs. All scripts are in the repo. Happy to
| discuss methodology.
| cmiles8 wrote:
| Challenge is the whole system is just a mess. Medicare probably
| lays too little. Commercial insurers have formed a mountain of
| red tape and bureaucracy and arguably pay too much, although
| individual bills (EOBs) are rarely logically defensible against
| any scrutiny.
|
| Healthcare providers try and combat all this by literally just
| making up pricing and trying to negotiate something while also
| having bloated administrative structures that raise costs for
| all.
|
| Nothing about the current state of the healthcare system makes
| much sense to anyone that tries to peel back the onion.
| paulddraper wrote:
| This is a believable result. Meta-analysis is 141-259% [1].
|
| Three reasons:
|
| 1. Medicare has quasi-monopolistic negotiation power that private
| insurers can only dream of -- Medicare spend two-thirds of all
| the private insurers combined. That's why private insurers would
| combine in a heartbeat if the FTC allowed it.
|
| 2. Moreover, that Medicare volume is concentrated in a specific
| segment of the market. If many providers dropped expensive United
| contracts, the insured people/companies might move to a new
| insurer. But Medicare's base will never leave.
|
| 3. Since Medicare covers older individuals, often on a fixed
| income, there is natural discriminatory pricing. (Think of the
| "senior discount" at your local entertainment venue.)
|
| [1] https://www.kff.org/medicare/how-much-more-than-medicare-
| do-...
| observationist wrote:
| Look at hearing aids. 50,000% markup or higher, even up in the
| 70k% range in some examples. Old people don't know what to be
| skeptical of, or at least haven't been nearly skeptical enough,
| and some industries are getting away with terrible
| exploitation, all blessed and sanctioned by the FDA.
| levocardia wrote:
| Also, commercial insurers are essentially cross-subsidizing
| Medicare: the higher revenue from commercial insurers is partly
| _why_ Medicare can be paid less. Similar dynamics exist with
| drug prices: the high US cost is a cross-subsidy to other
| countries. Maybe this is good (someone 's got to fund R&D),
| maybe this is bad (it's a net wealth transfer to the elderly),
| but it's an important part of the dynamic either way.
| recursivedoubts wrote:
| Daily reminder that the United States spends more public money
| per capita on healthcare than any other country and it's not
| close[1].
|
| If you want to know what socialized healthcare in the US would
| look like, you are lookin' at it right now bub.
|
| [1] -
| https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...
| jltsiren wrote:
| Daily reminder to always check data definitions before
| interpreting statistics.
|
| According to the OECD data, US 2023 healthcare spending was 28%
| by the government, 55% by private health insurance, 11% out of
| pocket, and 5% from other sources. OECD lists all US private
| health insurance policies under the "compulsory health
| insurance" heading. Apparently because there is no clear
| separation between compulsory and voluntary insurance, and
| because employer-paid insurance is not truly voluntary when it
| exists. (Because there is usually no option to take cash
| instead.)
|
| And then the chart you linked to combines compulsory insurance
| with government spending. Mostly because if compulsory health
| insurance exists in an OECD member state, it is usually legally
| mandated, regardless of whether it is provided by public or
| private entities.
| timtim51251 wrote:
| Lots of people are saying nonsense here. The actual reason
| commercial insurers pay more is that's the only way to can make
| more profits.
|
| Because of Obamacare requiring 80% of the money they collect to
| be spent, the insurance companies just get to keep 20%. So
| insurance companies spend more so they can collect higher
| premiums. That's how they make more money.
|
| Several doctor friends have told me this as well.
| skybrian wrote:
| I was under the impression that some companies that provide
| insurance also provide healthcare?
| shdudns wrote:
| This. It's hard to believe that the Obama team could have been
| this financially incompetent.
| bmcahren wrote:
| It's easy with hindsight to believe you could have capped
| expense at 200% medicare but getting what we got passed was
| nearly impossible at the time. Before Affordable Care Act,
| insurers had every tool available to deny care, maximize
| profits, and skim more than 20% off the top. It's great we're
| getting closer to the point that it feels to you like
| incompetence that these things aren't fixed today but your
| anger with the medical lobby is clearly misplaced here.
|
| Every major piece of legislation needs revisions to chase
| circumvention and we're well past due on updates but no
| legitimate bills have been presented that cover these topics
| and that's not a one-party issue.
| vjvjvjvjghv wrote:
| [delayed]
| genthree wrote:
| These limits don't apply to self-funded programs that are
| administered by big insurance companies (most large employers'
| plans, then) or plans less than two years old (whether there
| are measures in place to prevent simply rotating plans often to
| exploit this, I do not know)
| cogman10 wrote:
| This seems like we need similar price caps for healthcare
| providers, medical equipment providers, pharmaceuticals, etc.
| Done just in isolation for 1 part of the healthcare industry
| results in this obvious bad effect.
|
| Removing the rule wouldn't help things.
| raw_anon_1111 wrote:
| So I happen to be in Costa Rica for the month. Just like every
| other 1st world country, it has managed to have universal
| health care that is better and cheaper without private
| insurance.
|
| Even if you do get private insurance for quicker access, it's
| still much cheaper than the US.
|
| I just spoke to someone who flew down here to save $30K on
| dental work.
|
| The problem isn't the ACA, it's the ass backwards American
| health care system. I was at a meetup of American ex-pats here
| and half of them said they established residency here to join
| CAJA - the health care system
| phil21 wrote:
| In a vacuum sure. But insurance companies operate the only part
| of the healthcare system that is moderately competitive. In the
| end employers are the ones largely paying and they are
| professional negotiators enough to put price pressure on
| insurance plans.
|
| As such, as light of an incentive it is - it's the only party
| in the entire system that is incentivized in any way whatsoever
| to keep costs down.
| thaumasiotes wrote:
| You've identified a real issue with cost-plus pricing. But
| there's more to it than that. Commercial insurers have to pay
| more than Medicare, for the very simple reason that Medicare's
| pricing terms are that they get a discount beyond whatever the
| lowest price is that you charge anyone for the same thing.
| notfried wrote:
| I like this. It'd be great to see such a table of the key issues
| with proposed solutions, to highlight how the waste isn't an
| insurmountable impossibility to solve. Having said that, federal
| lobbying by the healthcare industry was $750 million in 2024 [1],
| and this is the blocker that needs to be addressed first to be
| able to enact change.
|
| [1] https://www.managedhealthcareexecutive.com/view/health-
| syste...
| rimbo789 wrote:
| Having worked in for profit health care pricing and costing yup
| that makes sense.
|
| The layering on of profit margins causes costs to grow
| exponentially
___________________________________________________________________
(page generated 2026-03-16 23:00 UTC)