"We've noted that for June they reached a difference of almost six percentage points. This is a trend we have seen for the last two years. We have seen costs deceleration across all indices in most of 2011 and then they reversed and accelerated at the end of 2011 and into 2012. What we have seen all along the way is the gap between Medicare and commercial plans has been fairly stable if not widening."
Robert Zirkelbach, spokesman for America's Health Insurance Plans, does not dispute the S&P data. "As far as why there are two big things to keep in mind," he says. "First, Medicare simply dictates the price they will pay for service. Those payments are often below cost. It gets shifted to consumers and employers and private coverage."
He pointed to a study from Families USA which estimated that the average family of four paid a "hidden premium" of $1,017 in 2008 to subsidize uncompensated care. "There is the situation where doctors and hospitals are losing money providing services to Medicare and Medicaid patients and as a result people with private coverage will cover that loss," he says.
Second, Zirkelbach says, provider consolidation is raising costs. "In some cases hospitals have the ability to simply dictate the prices that are charged to insurance. They are able to charge what they want and they do," he says. "There is a lot of research showing that the increase of provider consolidation leads to higher prices for services."