What unions pay for health care, and why it matters

Filed Under: Costs, Patients, Providers

auto worker health plan graph

Prices paid by autoworker unions for doctor services for insured people are consistently close to Medicare prices, according to a recent study, while hospital inpatient prices and emergency room prices paid by the unions are significantly higher than Medicare rates.

The study, by the National Institute for Health Care Reform, resulted in the graph at right showing how the services compare to the Medicare rate, which is what the government pays for goods and services under the Medicare program for the elderly and disabled. It’s an imperfect system, but this is the closest thing this market has to a regulated or uniform pricing structure.

“Medicare provides a useful external benchmark to compare prices in autoworker communities for three reasons. First, Medicare is by far the largest payer of medical care in the United States. Second, Medicare’s prices are adjusted to take into account regional differences in the cost of doing business, and they are designed to adequately cover the costs of reasonably efficient providers—making them a useful indicator of a reasonable price. Third, Medicare’s prices and price-setting methodology are publicly available and widely known,” says the report by the NIHCR, a nonprofit organization established by the International Union, UAW; Chrysler Group LLC; Ford Motor Company; and General Motors to conduct health policy research and analysis to improve the organization, financing and delivery of health care in the United States..

The three categories were chosen, the study said, because  Medicare prices for these services are fairly straightforward to calculate and partly because both Medicare beneficiaries and enrollees in the autoworker plan use a large number of these services. onclusions:

“Physician office visits. The prices paid by the autoworker plan for physician office visits, on average, are only 3 percent higher than what Medicare would have paid for the same services (see Figure 3 … ). In eight of the 19 communities, the autoworker plan prices for physician office visits are actually below Medicare. In the highest-price communities, the autoworker plan pays about 20 percent above Medicare.

“Hospital inpatient care. The prices for inpatient hospital care paid by the autoworker plan are, on average, 55 percent higher than what Medicare would pay, and the price gap varies widely across communities. In the lowest-price communities—Syracuse and St. Louis—the autoworker prices are 30 percent above Medicare. In the highest-price community—Lake County—the autoworker price is more than two-and-half times the Medicare price.

“There appears to be no relationship between inpatient hospital prices and objective measures of the quality of the inpatient care or with hospital market concentration. …  Market concentration probably plays a role, but it may be overshadowed by other factors, including hospitals’ reputations, geographic market segmentation within metropolitan areas, and concentration within specialized service lines, such as burn and trauma care. Together, these findings suggest that the ability of hospitals to command high prices rests on factors that are not easily discernible in quantitative measures of quality or market concentration.

“Hospital emergency department care. The prices paid by the autoworker plan for hospital emergency department care are, on average, more than double the Medicare price, and the price gap varies even more widely across communities than for inpatient care. In the lowest-price communities, the autoworker plan pays prices about 50 percent higher than Medicare, while in the highest-price community—Indianapolis—the autoworker plan pays prices three times as high as Medicare. The price variation among autoworker communities follows the same general trends identified by previous research.”