All-Payer Rate Setting: A Framework for a More Efficient Health Care System

  • Eric Flanagan
Keywords: health care reform, health insurance, rate setting


The United States is unique among countries with health care systems that rely primarily on private insurance companies because there are generally no regulations that mandate a standard fee schedule for health care services. The prevalence of multiple private and public insurers is known as a multi-payer system. Other countries that have multiple payers set prices unilaterally, as is the case in Japan, or through negotiations between payers and providers, as is the case in Germany. The outcome is a uniform set of prices that applies to all payers within a single hospital. This framework is known as all-payer rate setting. This paper explains how all-payer rate setting regulation can mitigate several problems plaguing the US health care system. Examples include cost shifting, price discrimination, and provider market leverage. The paper then analyzes how these problems negatively affect the US health care system. Finally, the benefits of all-payer rate setting are explained, followed by the downsides (or tradeoffs) of such a system.

Author Biography

Eric Flanagan

ERIC FLANAGAN is a third-year Master of Public Administration candidate at the Trachtenberg School. He graduated from Park University in 2012 with a bachelor’s degree in Management. He has over 9 years of experience working in military logistics support with the Defense Logistics Agency (DLA), both as a contractor and a federal employee. In his spare time he enjoys, exercising, reading self-help books, and watching sports. More recently he has begun traveling abroad and is expanding his list of places he’d like to explore. He hopes to eventually transition from full-time work and spend time growing a business, writing books, and motivating others to be the best version of themselves.