Research Revives Debate on Regulated Private-Plan Rates

Two new analyses from prominent health care research groups argue that huge savings could be realized if private insurers paid providers at roughly the same rate as Medicare does. However, industry experts point out that the political will to do so may not be strong enough — even with a public option supporter in the White House — and such a move could also have very problematic consequences.

First, a research report from RAND Corp. examined three policy options that could reduce hospital prices: regulating prices, improving price transparency and increasing hospital competition. Of those three, researchers found that “price regulation could have the largest impact on hospital prices and spending but would likely face political challenges.” Specifically, hospital spending could be reduced by $61.9 billion to $236.6 billion if reimbursement rates for private plans were capped at 100% to 150% of Medicare rates, creating a 1.7% to 6.5% reduction in national health spending.

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