Many Hospitals Charge More Than Twice What Medicare Pays for the Same Care

“There’s a lot of energy behind the public option, and this is clearly one of the reasons,” said Dan Mendelson, the founder of Avalere Health, a Washington, D.C., consulting firm.

Employers say the proof of how much more they pay underscores the need for change. “The report lays out in stark terms what the employers have been dealing with for years,” said Elizabeth Mitchell, the chief executive of the Pacific Business Group on Health, a San Francisco group that represents employers and companies in the region. “If we want to keep a private market in U.S. health care, it has to function,” she said. “It’s really not functioning.”

A public option, distinct from the more controversial “Medicare for all” proposals that would do away with private insurance, has been embraced by Joseph R. Biden Jr., the Democratic presidential nominee. Democrats and even some Republicans seem open to the idea, according to a recent poll from the Kaiser Family Foundation.

Hospitals warn that they might not be able to function if they were paid Medicare rates. “There is certainly a cost shift, because the government knowingly underpays,” said Tom Nickels, an executive vice president for the American Hospital Association, a trade group. He warned that hospitals would lose billions of dollars in revenue. Some could be shuttered if forced to operate at lower Medicare payments.

“We cannot survive in that kind of the world,” he said, adding that many hospitals are struggling financially because of the pandemic. “To suggest cutting hospitals during a pandemic is outrageous.”

The report, which has data from the District of Columbia and every state but Maryland (because that state sets hospital rates), provides a sweeping view into the wide variation of prices paid by private insurers, which pay multiples of what Medicare does for a hospital stay or an M.R.I. “The magnitudes are quite eye-catching,” said Michael R. Richards, a health economist at Baylor University who reviewed the study.

The most costly hospital system in the nation from 2016 through 2018, according to the researchers, was John Muir Health in Walnut Creek, Calif., near San Francisco. Private insurers pay its hospitals four times what Medicare reimburses for care.