Here’s a New Explanation for Why U.S. Health Care Spending Is So Damn High

(Chart: RAND)

Chapin White has come up with an explanation for why the United States spends so much more than the rest of the world on health care: private health plans pay wild prices for outpatient care.

White and colleagues have put data supporting that conclusion in a paper distributed by the RAND Corp.

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White briefed state insurance regulators on the study findings today, at a session in New York that was organized by the National Association of Insurance Connissioners’ Health Insurance Innovations Working Group.The NAIC started its summer national meeting this weekend in New York.

The NAIC is a group for insurance regulators. Its meeting discussions can shape states’ efforts to write and update Insurance laws and regulations.

White said RAND conducted its research in response to earlier research showing that U.S. residents get about as much health care as residents of other countries but pay much higher prices for the care, and other research showing that most of the gap is due to the high prices private health plans pay.

White’s team looked at the price gap by comparing health care facilities reimbursement data, from states with good data, with traditional Medicare plan reimbursement data.

One thing the researchers found is that private plan payments averaged 2xx% if Medicare payments for the same care at the same hospitals, up from 2xx%.

Another thing is that the private plan-to-Medicare spending ratio for facility bills varied wdely from state to state.

The ratio ranged from under 175%, in Michigan, up to more than 275%, in India, with a median between 225% and 250%.

The researchers found that, in most of the states studied, the ratio was much higher for outpatient care than for inpatient care.

In most states, the ratio for inpatient care was around 200% or lower.

The ratio for outpatient care was under 250% care in the cheapest states and over 300% in the most expensive states.

White said he thinks the size of the gaps is at least partly due to complicated provider payment agreements.

He said two relatively easy things regulators could do to improve the price situation are to make health plans use tougher provider reimbursement agreements and, especially, to limit prices for out-of-network care.

Limitson prices for out-of-network care have a surprisingly big effect, White said.

“That’s why providers really fight those limits,” he said.

Several state regulators at the session asked White to add hospitals’ data on the gap between what Medicare pays and what hospitals say they need to get to break even.

Regulators said they want to know how much of the extra private plan spending might be the result of hospitals trying to make up for losses on Medicare patients.

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