Private Insurers in California Pay More than Double what Medicare Does for Similar Services

A new analysis of financial data from general acute care hospitals in California reveals that private insurers paid, on average, 209 percent more than what Medicare paid for similar services in 2015 and 2016.

Funded by the nonprofit West Health Policy Center, the findings reinforce the results of a recent RAND Corporation study that showed private health plans across 25 other states paid hospitals more than double, on average, than Medicare.



Using financial data hospitals submitted to the California Office of Statewide Health Planning and Development, researchers compared what private insurers and Medicare paid for hospital services. The ratio of private insurance to Medicare payments is substantially higher than the 209 percent average at some hospitals. For example, at Stanford University Hospital, the ratio is 276 percent, and at Sharp Memorial Hospital in San Diego, it’s 271 percent.

The authors wrote that the significant difference in payment rates in the report may be due in part to consolidation in the hospital industry and the pressure private insurers face from employers and employees to offer broad networks. These factors can result in hospitals being able to extract higher payments from private insurers.

Alternatively, the authors acknowledge another perspective: that higher rates of private payments could be needed to offset payment shortfalls from Medicare and Medi-Cal, California’s Medicaid program.

Regardless of the reasons, the data could be helpful in assessing the likely effects of hospital rate-setting or single-payer proposals that may impact hospital payments in California, said the authors — adding the data could also provide useful information to the public and others interested in understanding hospital pricing in the state.



U.S. employers will spend more than $800 billion in 2019 on health coverage for employees — an amount that will exceed $2 trillion by 2040, according to a West Health analysis of National Health Expenditure Accounts illustrated on


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