Why does the same procedure cost an employer several times what Medicare pays?

Medicare is the yardstick

In healthcare, Medicare is the benchmark every price is measured against — the way the S&P 500 is the benchmark for investing. When analysts talk about what a hospital service "should" cost, they almost always express it as a multiple of the Medicare rate for that same service. It's the closest thing the system has to a reference price.

Yet almost no employer has ever been shown where their own plan sits against it. That single missing number is the gap we exist to close.

Why the commercial market pays a multiple

Medicare reimburses hospitals at rates that are widely documented to fall below what hospitals say it costs them to deliver care. Hospitals recover that shortfall somewhere — and that somewhere is the commercial market: employers and their health plans. The result is that the same procedure, in the same facility, is frequently billed to a commercial plan at several times the Medicare rate.

None of this is hidden in a strict sense — hospital-payment dynamics are studied publicly by organizations like the American Hospital Association and independent health-policy researchers. What's hidden is the part that matters to you: where your specific plan lands on that scale.

Why claims are where the answers are

Medical claims are the largest share of plan spend and the part almost no one examines closely. Premiums get negotiated at the margins each year; plan design gets tweaked. But the underlying claims — the actual prices paid for actual care — usually go unexamined, year after year. That's exactly why the opportunity hides there.

What this means for your plan

If you've never seen your plan benchmarked against Medicare, you're not unusual — you're typical. Most employers absorb the annual increase with a shrug because no one has opened the box. The useful next step isn't a promise; it's a look. An estimate gets you a directional range in a couple of minutes. A short conversation on your own claims turns that into a number you can actually trust.

More insights on benchmarking, transparency, and controlling healthcare costs are on the way.