According to new research from RAND Corporation, annual hospital spending can be decreased by regulating hospital prices by setting what private health plans pay. The researchers arrived at conclusion studying three policy options-– regulating hospital prices, improving price transparency and increasing competition among hospitals – to find which action would have the most impact.
- Hospital spending could be reduced annually by $61.9 billion to $236.6 billion, respectively, according to the report, If the prices that commercial payers paid to hospitals were set as high as 150% and as low as 100% of Medicare pays. That change would create a 1.7% to 6.5% reduction in national health spending, RAND said in the study.
- Greater price transparency could reduce U.S. spending by $8.7 billion to $26.6 billion per year while increasing competition could reduce spending by $6.2 billion to $68.9 billion annually, the report said.
- “Given how concentrated today’s hospital markets are, policymakers would need to radically restructure hospital markets–and more so than modeled here–for prices to approach competitive levels,” the researchers said in the report.
- The finding assumes significance because In 2019, U.S. healthcare spending reached $3.8 trillion, according to the Centers for Medicare and Medicaid Services. Hospital spending made up the largest portion of spending (31%) and climbed to $1.2 trillion that year.
- The American Hospital Association disagrees with the RAND report’s recommendation and said that price-setting would only make commercial payers richer at the expense of creating change that would actually benefit patients.
- “As policymakers consider options for reducing hospital prices paid by private health plans, they will need to weigh the potential impact of different policies on hospital revenues and the quality of care, and they will also need to take into account the political and administrative feasibility of each option,” said Christopher Whaley, a RAND policy researcher and study co-author.