Hospital Markup: What They Charge vs What Medicare Pays
The gap between hospital charges and Medicare payments, explained with data.
The gap between what hospitals charge and what they actually receive from Medicare is staggering. Across 4,430 procedures and 1.81B services, the average markup is enormous.
How the Billing System Works
Hospitals set their own "chargemaster" prices — essentially a list price for every service. These prices are largely arbitrary and rarely reflect actual costs. Medicare ignores these charges and pays based on its own fee schedule.
Who Gets Hurt?
The uninsured and out-of-network patients bear the brunt of inflated charges. While insured patients benefit from negotiated rates, those without insurance may receive bills at the full chargemaster price — sometimes 10x or more what Medicare would pay.
The 2021 Hospital Price Transparency Rule requires hospitals to publish their prices, but compliance has been slow and enforcement weak. Sites like ClearPrices help fill the gap by making Medicare data accessible.