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Reimbursing at Medicare Rates to Cut Healthcare Spending by $352B

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March 02, 2021 – Healthcare spending would be about $352 billion lower in 2021 if private payers reimbursed providers at Medicare rates, according to a new analysis from Kaiser Family Foundation.

The analysis of data from MarketScan and FAIR Health showed that total healthcare spending for the privately insured population would decrease by 41 percent from the current projected total of $859 billion this year.

Additionally, employer contributions toward employee premiums and patient out-of-pocketing spending would decrease by hundreds of billions of dollars each—$194 billion and $116 billion, respectively—under the scenario.

However, the move would be a detriment to hospital and other provider revenue, researchers stated.

“Reducing the prices private insurers pay for health care services could help alleviate the financial burden of health care for employers and individuals with private insurance. However, doing so would reduce revenue for hospitals and other health care providers, with uncertain effects on patient care,” they wrote in the analysis.

Researchers attributed about half (45 percent) of the reduction in healthcare spending to lower reimbursements for hospital outpatient services, where the difference in reimbursement rates among private payers and Medicare is the largest.Meanwhile, they projected reimbursements for hospital inpatient services to account for 27 percent of the total […]

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