Commercial insurance markups over Medicare prices vary widely by specialty
Nine specialties received commercial payments between 120% and 150% of Medicare rates, on average.
Private insurers generally pay physicians substantially higher rates than Medicare does for the same service. This differential could have implications for debates over physician payment reforms, public option and single-payer policies, and Medicare payment reforms.
“Policy proposals to reduce commercial prices and curb health care spending by benchmarking private payment rates to Medicare prices could significantly affect physician payments, but the effects will likely vary considerably by specialty,” according to a new report from the Urban Institute.
Related: Wide variation in what private insurers pay hospitals, but it’s still more than Medicare
Researchers analyzed FAIR Health’s private health insurance claims database covering more than 150 million people nationwide to quantify payment markups. Among its findings: Family medicine, obstetrics and gynecology, dermatology, ophthalmology and psychiatry had the lowest commercial markups relative to Medicare prices, averaging about 110% or less of Medicare rates.
Nine specialties received commercial payments between 120% and 150% of Medicare rates, on average. These included gastroenterology, cardiology, general surgery and orthopedics. Radiology and neurosurgery received commercial payment rates of between 180% and 220% of Medicare rates, and emergency department and critical care specialties received commercial payment rates of 250% of Medicare rates.
Anesthesia received the highest markup at 330% of Medicare rates.
Although policy proposals that seek to use Medicare rates as a benchmark for commercial payments have been considered, they face considerable opposition.
“Though a multiyear transition and plans for access monitoring would likely be included in any proposal, concerns remain that such policies could be quite disruptive to physician practices and could threaten access to care,” the report said. “This analysis finds that only a small number of physician specialties receive commercial markups over Medicare payment rates above 150%. These specialties would face the largest income losses if forced to accept Medicare rates from private payers.”
The study suggests wide variation across physician specialties in potential payment rate reductions if commercial rates were set closer to current Medicare rates.
“Whether such payment rate reductions would threaten patient access is unknown but will be important to consider as specific policies are developed or implemented,” the study concluded. “Ultimately, however, narrowing the payment disparity between primary care and other specialties, improving access to primary care and reducing health system costs will require physician payment reforms aimed at all payers.”
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