Are Medicare approved amounts significantly different than Commercial insurance approved amounts?
Yes, insurance company payments are much greater than Medicare (and Medicaid) payments. The following applies to hospitals not physicians (though similar results may be found). Note that the underpayments (shortfalls) mentioned below are covered by insurance companies and patients. And, if insurance company payments did not cover uncompensated (or uncollectible) costs, as well, hospitals would go broke.
About 16 years ago, I had reason (don't ask!) to look at such matters. A local, non-profit, public hospital published their annual statement. The amounts were interesting, to say the least.
As I recall the amounts, approximately, in millions of US$.
Net billing 210
Medicare and Medicaid underpayment 50
Payments from insurance and patients 120
Building fund reserve 10
[The above figures are off by 10 million, but, after 16 years, I can't remember which figure is wrong. The point is that payments from insurance companies are much larger than Medicare (or Medicaid) because those payments cover all underpayments to hospitals.]
AMERICAN HOSPITAL ASSOCIATION, UNDERPAYMENT BY MEDICARE AND MEDICAID,
FACT SHEET, December 2016 :
Underpayment is the difference between the costs incurred and the reimbursement received for delivering care to patients. Underpayment occurs when the payment received is less than the costs of providing care, i.e., the amount paid by hospitals for the personnel, technology and other goods and services required to provide hospital care is less than the amount paid to them by Medicare or Medicaid for providing that care. Underpayment is not the same as a contractual allowance, which is the difference between hospital charges and government program payments.
In the aggregate, both Medicare and Medicaid payments fell below costs
Combined underpayments were $57.8 billion in 2015. This includes a shortfall of $41.6 billion for Medicare and $16.2 billion for
For Medicare, hospitals received payment of only 88 cents for every dollar spent by hospitals caring for Medicare patients in 2015.
For Medicaid, hospitals received payment of only 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2015.
In 2015, 64 percent of hospitals received Medicare payments less than cost, while 60 percent of hospitals received Medicaid payments
less than cost.
From Revcycle Intelligence:
Reimbursement Shortfalls, Uncompensated Care Costs Grew in 2016:
AHA data uncovered that Medicaid and Medicare reimbursement shortfalls reached $68.8 billion in 2016 and uncompensated care costs rose to $38 billion.
The recent growth in Medicaid and Medicare reimbursement shortfalls stemmed from Medicare underpayments. Medicare reimbursement was $48.8 billion less than actual hospital costs in 2016.
With the payment shortfall, hospitals only received 87 cents for every dollar spent to treat Medicare patients.
Required to accept government insurance:
Most hospitals had to cover the financial loss of treating Medicare and Medicaid beneficiaries because the majority of hospital patients belong to the healthcare programs. Patients from the Medicare and Medicaid programs represented more than 60 percent of all hospital care.
Non-profit hospitals must also treat Medicare and Medicaid beneficiaries to qualify for federal tax exemptions.
Self-pay patients do not generate as much revenue for hospitals as insured patients. True self-pay patients who are responsible for all healthcare costs typically paid about 6.06 percent on the dollar, while patients who owed out-of-pocket costs under their health plan paid about 15.51 percent, a recent Crowe Horwath study uncovered.