Same Care, Different Price: Why Employer Plans Pay So Much More

October 30, 2026

The same hospital, the same procedure, the same day: an employer plan pays about two and a half times what Medicare pays. Medicare Advantage pays almost exactly what Medicare pays. Medicaid pays less.

The price of care in America is set less by the care than by the card in the patient's wallet. Agents who understand why can explain Medicare to a client turning 65, and can answer the claim that Medicare Advantage shortchanges providers.

The numbers

Employer plans pay hospitals far above Medicare; every government-linked payer pays at or below it. Medicare's rate is the yardstick at 100%.

Coverage type	What providers are paid	Services	Source
Employer group health	254% of Medicare	Hospital inpatient and outpatient, 2020 to 2022	RAND Round 5.1, Dec 2024
Employer group health	189% of Medicare ($21,400 vs $11,400 per admission)	Hospital inpatient, 2013	CBO, 2017
ACA marketplace	Below employer small-group (6.9% less professional, 13.3% less inpatient, 26.3% less outpatient), still well above Medicare	Physician and hospital, 2021	Health Affairs, 2024
Original Medicare	100%	All	The benchmark
Medicare plus Medigap	100%; Medigap pays cost-sharing on the Medicare-allowed amount	All	Federal payment rules
Medicare Advantage	About 100%	Physician and hospital inpatient	AJMC 2018; CBO 2017
Medicaid	75% of Medicare	Physician, 2024	Urban Institute fee index

What a patient pays in cash varies widely by hospital. A Johns Hopkins study found 39% to 44% of hospitals posted imaging cash prices below their median insurer rate.

Medicare Advantage pays what Medicare pays

Medicare Advantage pays doctors and hospitals essentially one-for-one with Original Medicare, and the evidence is consistent:

Doctors: the median MA-to-Medicare price was 1.01 for a standard office visit and 1.00 for an EKG (Chen, Hicks and Chernew, AJMC, 2018). An earlier study by Trish and colleagues found 0.969.
Hospitals: the Congressional Budget Office found MA inpatient rates were roughly equal to Medicare's on average, and varied far less across markets than commercial rates (Maeda and Nelson, CBO, 2017).

Federal rule anchors it. Under 42 CFR 422.214, a provider without an MA contract must accept as payment in full the amount it would get from Original Medicare. That sets a ceiling on what any hospital can hold out for, so MA plans negotiate from Medicare's rate rather than from the hospital's list price. Employer plans have no such anchor.

When someone says Medicare Advantage underpays providers, the data says otherwise: MA pays the same rate Original Medicare does. A provider's complaints about an MA plan may be real, but they are not about a lower price per service.

Our stance: employer plans pay more because they have no anchor

At Brock, we believe employer plans pay far more mainly because hospitals have the market power to charge them more, and nothing caps the price. The evidence:

Medicare and Medicare Advantage have an anchor; employers don't. Medicare sets its price. MA plans negotiate in the shadow of that price, because an out-of-network hospital must accept the Medicare rate anyway. An employer plan negotiates with no backstop, so a must-have hospital can name its price.
Market power drives commercial prices. Researchers studying claims for 88 million people with employer coverage found hospitals with no local competitor charged about 15.3% more than hospitals in markets with four or more. Prices for the same MRI varied by a factor of 12 across hospitals for employer-insured patients, against under a factor of three for Medicare (Cooper, Craig, Gaynor and Van Reenen, NBER).
Price, not more care, explains the spending. The same research found price differences explain far more of the variation in private spending than the amount of care does.
"Cost shifting" is not the main story. Hospitals often say they charge employers more to make up for low Medicare and Medicaid payments. Austin Frakt's review of the evidence found cost shifting "can and has occurred, but usually at a relatively low rate," and that the balance of market power between hospitals and plans significantly affects private prices (Milbank Quarterly, 2011).

The hidden cost lands on workers. Employers pay these prices out of the same budget as wages, and employees pay through premiums, deductibles and smaller raises.

The researchers estimated that capping private hospital prices at 20% above Medicare would cut inpatient spending on the privately insured by 17.4%. We are not arguing for a specific policy. We are arguing that Medicare's rate is a fair, workable price for care, and Medicare Advantage proves private plans can pay it.

What it means for clients and agents

For a client leaving an employer plan, Medicare is not a step down in what their doctors are paid per service. It is a move from the highest-priced system to the benchmark.

Turning 65 off group coverage: explain that their hospital likely charged their employer plan about two and a half times the Medicare rate. Medicare's lower, standard prices are part of why Medicare cost-sharing is predictable.
Original Medicare with Medigap: every bill is priced at the Medicare-allowed amount. The only extra exposure is Part B excess charges, capped at 15% above the Medicare amount for doctors who don't accept assignment.
Medicare Advantage: in-network providers are paid about what Original Medicare pays. The real differences between MA and Medigap are networks, prior authorization and out-of-pocket design, so compare those, not provider pay.
When a provider says it doesn't like MA: ask what the issue is. It won't be a lower rate per service, so it is usually worth knowing what it is before a client chooses a plan.
Family members on employer plans: the same high prices drive their premiums and deductibles. Medicare-age parents are often the first in a family to see what standard prices look like.

Get the free Medicare Bible

Clients turning 65 off group coverage need someone who can explain how Medicare really works. The Medicare Bible keeps those fundamentals at your fingertips. Download the free Medicare Bible.

Related reading:

Sources

Justin Brock

Justin Brock is a Marine Corps veteran turned Medicare industry leader, known for building bold systems, strong teams, and real momentum in a space that often feels complicated and outdated.

Back to Blog