Center for Advancing Health Policy through Research
Hospital Payment Cap Simulator
Hospital payment caps could save state employee health plans millions while keeping hospital operating margins healthy.
Interact with a simulator of state savings from hospital payment cap for all state employee health plan members.
Hospital Payment Cap Simulator
Hospital payment caps could save state employee health plans millions while keeping hospital operating margins healthy.
Visualizing the Impact of the Hospital Payment Caps
Motivation
Hospital prices have been identified as the main driver of rising health care spending in the US, prompting states to explore policies aimed at controlling hospital price growth. Hospital payment caps, which institute limits on hospital payments—typically at a percentage of Medicare’s rate—have been found to reduce hospital facility prices and member out-of-pocket spending.
The Hospital Payment Cap Simulator provides anyone from policymakers to researchers with insights into how much state employee plans across the US could save from hospital payment caps and the impact on commercial hospital operating margins. Read the instructions below to learn how to use the tool.
For states seeking technical assistance, please email roslyn_murray@brown.edu
About the Simulator
How to use it, how it was put together, where the data comes from.
Adjusting the Slider
Drag the slider to modify the payment cap and view the corresponding state-level savings. Darker shades indicate larger savings estimates.
Exploring Savings By State
Click on any state to see detailed savings at the hospital level, as well as the changes in hospitals’ commercial margins with the cap versus without it.
Adjusting Hospitals Subject to the Cap
Use the checkbox to select which hospitals to include. Uncheck “Small and/or Rural” to exclude small and rural hospitals from the policy.
Returning to the Main Map View
Click on the white space or outside the U.S. area of the map to return to the main map view.
Note: For optimal viewing, please enter full screen by clicking the full-screen button at the bottom right corner of the screen.
This study examines the potential for state employee health plans to reduce spending through hospital payment caps. By setting payment rates at 200% of Medicare, state plans could save an average of $150 million per state annually, totaling $7.1 billion nationally. The proposed payment caps would have a minimal impact on hospital operating margins, making it a promising strategy for states to address rising health care costs without jeopardizing hospital financial stability.
Read the full paper here for more information on the methodology
Visit the Hospital Payment Cap Simulator
Interact with the simulator of state savings from hospital payment cap for all state employee health plan members.
Meet the Creators of the Simulator
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Jay Shroff MS
Senior Data Scientist -
Nandita Radhakrishnan BA
Senior Data Analyst
Potential for Millions Saved While Keeping Margins Intact: About the Study
This study, led by researchers from CAHPR at Brown University, and published in Health Affairs examines the financial impact of capping hospital payments for state employee health plans at 200% of Medicare rates. By analyzing healthcare spending data across 46 states and Washington, D.C., the study assesses the financial impact of such caps on both state budgets and hospital stability. The researchers also investigate different cap designs, their feasibility, and the policy implications, considering how similar strategies could be adapted to broader healthcare markets.
Authors: By Roslyn C. Murray, Christopher M. Whaley, Erin C. Fuse Brown, and Andrew M. Ryan
Date of Publication: December 3, 2024
Funding: This study was supported by funding provided by Arnold Ventures.
Key Findings from the Study
Cost Savings
- Implementing a payment cap at 200% of Medicare rates could have saved state employee health plans $7.1 billion nationwide in 2022.
- On average, states could have saved $150.2 million annually, representing 0.35% of state expenditures.
- Savings ranged from $2.7 million in Rhode Island to $993 million in California.
Minimal Impact on Hospital Financial Stability*
- Commercial hospital operating margins would decrease only slightly, from 42.7% to 41.7%, under the proposed cap, indicating the financial viability of hospitals would be preserved.
Potential for Broader Application to Commercial Market
- While the study focused on state employee health plans, extending similar caps to the broader commercial market could yield substantial savings. Extrapolated data suggest a potential savings of $87.7 billion annually for the entire commercial market under the same cap levels.
*The limited impact is partly due to state employees representing a relatively small share of hospital volume and revenue.
Meet the Authors of the Study
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Roslyn C. Murray Ph.D., MPP
Assistant Professor of Health Services, Policy & Practice -
Christopher M. Whaley Ph.D.
Associate Professor of Health Services, Policy & Practice -
Erin Fuse Brown JD, MPH
Professor of Health Services, Policy & Practice -
Andrew M. Ryan Ph.D.
Director for the Center for Advancing Health Policy Through Research, Professor of Health Services, Policy & Practice
Related content
This issue brief provides key lessons for states considering hospital payment caps. Setting caps above Medicare rates but below state plan prices can encourage provider participation. Exempting small and rural hospitals protects vulnerable facilities, while legislating payment caps ensures long-term stability. Oregon’s strategy offers valuable insights for managing health care costs while maintaining access to care.
Oregon's 2019 hospital payment cap for state employee health plan enrollees saved $107.5 million (4% of total spending) in the first two years. The cap reduced inpatient costs by nearly $2,800 per admission in the second year and lowered outpatient prices by $130.50 per procedure. This policy illustrates an effective strategy for states to control hospital price growth and achieve savings in state employee health plans.
Oregon's 2019 hospital payment cap for state employees lowered out-of-pocket costs by 9.5% for enrollees in higher cost-sharing plans, saving $1.8 million over two years. However, it also led to a 4.8% rise in outpatient service use, cutting overall state savings by $10.3 million - suggesting that while price caps can lower enrollee costs, states should weigh the potential rise in health care use when designing policies.
This STAT news article discusses Oregon's successful experiment in implementing price caps on hospital services, saving $107.5 million in two years, suggesting a viable solution for states battling soaring healthcare costs.
This April 2024 CAHPR newsletter highlights our featured research of the quarter on the impact of hospital price caps in the state of Oregon. Other research and policy highlighted include the lifecycle of private equity investments in physician practices, ramifications of hospital-physician integration on primary care access, and characterizing beneficiary access and behavior in Medicare.
Interact with a simulator of state savings from hospital payment cap for all state employee health plan members.