Why Employers Pay Too Much for Health Care
May 22, 2019
News Article
Did you know that employers are paying hospitals more than twice as much as what Medicare pays? At some hospitals they are paying four times as much. Those are the findings from a new study by the RAND Corporation.
It wasn’t always so. In fact, as recently as 2000, private payers were paying only 10% more than Medicare. Since then, the gap has been growing by leaps and bounds.
What makes this especially surprising is that it has happened at a time when employers have been getting increasingly aggressive about controlling health care costs.
So, what’s going wrong? And who’s to blame? In my opinion, employers are to blame.
A few employers are smart buyers of care. Rosen Hotels & Resorts in Orlando, for example, is spending from one-half to two-thirds of what other employers typically spend. By contrast, most employers are making four big mistakes.
Before getting to that, let’s dispense with a misconception that is popular both on the political left and in the business community. That’s the idea that because the federal government is such a large buyer of care it can force hospitals to cough up large discounts that an ordinary employer has no hope of negotiating.
