The RAND Corporation released an Impact of Policy Options for Reducing Hospital Prices Paid by Private Health Plans “study” that claims to have found upwards of $62 billion in potential healthcare savings—if hospitals would only accept payment rates that are in line with what Medicare pays.
The problem—as anyone familiar with healthcare in America knows—is that Medicare rates don’t come close to meeting hospital operating costs. Medicare actually pays below the cost of delivering care. We’ll sit back a moment while you do the math.
Okay, pencils down. Did you get the same result we did? Operating at a loss across the board is a surefire way to lower both quality and quantity of care. But RAND’s conclusions seem to be based on a different kind of math.
The COVID-19 pandemic has revealed a lot about the current state of America’s healthcare system. Revenue in the country’s largest hospitals is down an average of $440 million, resulting in many hospital closures. Now, RAND wants us to think that the hospitals still in business should match the rates of a program that—while vital to protecting the most vulnerable citizens—puts hospitals at an operating loss.
Why? Price-setting would mean more money for insurers, since they wouldn’t have to pay hospital billing rates that cover the true cost of care. Now, that math does add up—but only in insurers’ favor.