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posted on 02 July 2017

An Analysis Of Private-Sector Prices For Physician Services

from the Congressional Budget Office

Physicians’ services account for a substantial portion of health care spending in the United States, but research on the prices private insurers pay for those services has been limited. Using 2014 claims data from three major insurers, we analyzed the prices paid for 21 common services and compared them with the estimated amounts that Medicare’s fee-for-service (FFS) program would pay.

Consistent with other studies, our results showed that commercial prices were higher than Medicare FFS prices, on average, and that prices for a given service varied as much as twofold across areas and providers, even after adjusting for differences in input costs. Out-of-network prices that insurers paid in commercial plans were as much as three times their in-network prices.

In contrast, we found that prices paid by the same insurers in their Medicare Advantage plans were nearly the same as those paid by Medicare FFS. Medicare Advantage prices for a given service varied much less across areas and providers than commercial prices did, and the variation in Medicare Advantage prices correlated closely with the variation in Medicare FFS prices. In- and out-of-network prices paid by insurers in their Medicare Advantage plans were nearly identical, perhaps because statutory restrictions on out-of-network charges in Medicare Advantage plans reduce Medicare Advantage prices.

[editor's note: Presentation by Daria Pelech, an analyst for CBO’s Health, Retirement, and Long-Term Analysis Division, at AcademyHealth's Annual Research Meeting.]

An Analysis of Private-Sector Prices for Physician Services from Congressional Budget Office

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