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Friday, 16th January 2009

Consumers and Employers Paying Almost $90 Billion Due to Under-Payments to Hospitals and Physicians by Medicare and Medicaid

Consumers and Employers Paying Almost $90 Billion Due to Under-Payments to Hospitals and Physicians by Medicare and Medicaid
Source: America's Health Insurance Plans

Low Medicare and Medicaid reimbursements to hospitals and physicians lead to significantly higher health insurance costs for consumers and employers, according to a study released today by Milliman Inc. The report found that annual health care spending for an average family of four is $1,788 higher than it would be if Medicare, Medicaid and private employers paid hospitals and physicians similar rates, with total provider reimbursement unchanged.

The continued underpayment of providers by public programs has devastating consequences for families and employers that are struggling to afford health care coverage. These underpayments create a payment gap to hospitals and physicians that privately insured employers and consumers must close through a “cost shift” or “hidden tax.”

The Milliman study measures the cost shift as the difference between actual payment rates and average payment rates for Medicare, Medicaid and private payers; total payment to hospitals and physicians is held constant. The study does not assess appropriate levels of payment, but rather the disparities among current payment rates.

The study found that cost shifting:

  • Adds an estimated $1,512, or 10.6 percent, to the average premium for a family of four
  • Of this amount, employers pay approximately $1,115 and the employee share is $397
  • Families pay an additional $276 more in coinsurance and deductibles due to the cost-shift

+ Full Report (PDF; 146 KB)


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