Commercial Health Insurance Markups over Medicare Prices for Physician Services Vary Widely by Specialty

Private insurers generally pay physicians substantially higher rates than Medicare does for the same service. Policy proposals to reduce commercial prices and curb health care spending by benchmarking private payment rates to Medicare prices could therefore significantly affect physician payments, but the effects will likely vary considerably by specialty. In this study, we assess the variation across physician specialties in commercial markups over Medicare prices for professional services. To do so, we use March 2019 to February 2020 data from FAIR Health’s private health insurance claims database covering more than 150 million people nationwide. Our sample includes 17 physician specialties and approximately 20 services per specialty that represent about 40 percent of total professional spending. We find that family medicine, obstetrics and gynecology, dermatology, ophthalmology, and psychiatry had the lowest commercial markups relative to Medicare prices, averaging about 110 percent of Medicare rates or less. Nine specialties received commercial payments between 120 and 150 percent of Medicare rates, on average. These included gastroenterology, cardiology, general surgery, and orthopedics. Radiology and neurosurgery received commercial payment rates of 180 and 220 percent of Medicare rates, whereas emergency department and critical care specialties received commercial payment rates of 250 percent of Medicare rates. Anesthesia received the highest markup at 330 percent of Medicare rates. Our findings have important implications for debates over physician payment reforms, public option and single-payer policies, and Medicare payment reforms.