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RAND’s Recommendation For Reducing Healthcare Spending Isn’t Right Or Realistic

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A copy of a hospital bill showing line items of various charges. [GETTY] In a recently released RAND Corporation report analyzing what reforms would have the greatest impact on reducing U.S. healthcare spending, the nonprofit research firm claimed that “Regulating prices for all private plans, by either setting or capping prices …” would be the best route for our nation to pursue.

Not only is that conclusion sorely incorrect, it’s flat-out unrealistic.

For example, RAND claims that when commercial payer rates are capped at 100 to 150 percent of Medicare rates, hospital spending can be reduced somewhere between $61.9 billion to $236.6 billion. Yes, those are some significant savings. But understanding the driving force behind those big differences, as well as the dark side of a decision like this, is key.

The reason why capping commercial payer rates would have such a significant impact on healthcare spending is because healthcare institutions are largely unable to turn any kind of profit when providing care at those low Medicare and Medicaid rates. And as a result, healthcare institutions have had to adapt to the low rates paid by Medicare and Medicaid by raising charges for the other half of the population that is commercially […]

Click here to view original web page at www.forbes.com

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