Despite persistent debate over healthcare pricing, one pattern continues to hold remarkably steady: commercial reimbursement tracks closely as a multiple of traditional Medicare.

Across both inpatient and outpatient services, commercial in-network rates across four major national PPO networks remain concentrated within a relatively stable distribution when expressed as a percentage of Medicare. In our analysis, most inpatient service lines cluster between ~175% and 325% of Medicare, with outpatient services showing similar stability (additional figure below). Anesthesia is a notable exception, where commercial rates tend to track a higher margin over Medicare, potentially due to special reimbursement rules for these services.

Given the wide variation in contracting strategies, benefit designs, and negotiated dollar amounts across payers and markets, this consistency may seem surprising. But it is not accidental.

Medicare as the De Facto Reference Price

Medicare remains the closest thing the U.S. healthcare system has to a national reference price.

Its reimbursement schedules are built on explicit relative value assumptions, transparent rate-setting rules, and well-documented geographic and specialty adjustments. While Medicare prices vary by wage index, locality, and site of care, the structure of the program provides a consistent anchor for understanding variation in commercial pricing and in the estimated value of specific medical services.

That structure is precisely why Medicare has become the default benchmark for healthcare pricing analysis. When commercial rates are expressed as a percentage of Medicare, the resulting comparisons are more interpretable, more stable over time, and more portable across markets.

Why Medicare Benchmarking Matters

In health economics and policy analysis, Medicare benchmarking is a well established method for comparative analysis across different types of services. Large-scale healthcare pricing studies, including the RAND Hospital Price Transparency Study, analyses from the Health Care Cost Institute (HCCI), and work by the Congressional Budget Office, consistently express negotiated commercial payments as a percentage of Medicare. This approach enables apples-to-apples comparisons across service lines, markets, and payers; for Serif Health and our partners Medicare benchmarking further provides a stable reference for normalizing multi-year Transparency in Coverage data.

In health policy and economics, Medicare benchmarking is not merely convenient; it is

methodologically accepted and validated approach. The RAND Hospital Price Transparency Study, which remains the most widely cited analysis of commercial hospital pricing and recently entered its sixth round, as well as other studies express negotiated commercial payments as a percent of Medicare for several reasons:

• It allows apples-to-apples comparisons across service lines, markets, and payers.
• It mitigates distortions created by facility-level chargemasters, heterogeneous contract structures, and other billing practices.
• It provides a consistent reference against which multi-year TiC data can be normalized.

This is why large-scale pricing studies consistently express commercial payments as a percentage of Medicare rather than in absolute dollars. The goal is not to obscure variation—but to make it interpretable.

How Medicare Reimbursement Actually Varies

Benchmarking to Medicare does not imply that Medicare prices are uniform. In fact, meaningful variation is built directly into Medicare’s payment systems and must be accounted for in any rigorous analysis. At Serif Health, we consider multiple Medicare payment systems including:

• Inpatient Prospective Payment System (IPPS) rates vary by MS-DRG weights, hospital wage index, case-mix, and policy-driven adjustments
  
  
• Outpatient Prospective Payment System (OPPS) rates vary by APC packaging, device offsets, and hospital-level factors
  
  
• Physician Fee Schedule (PFS) rates vary by locality (MAC), site-of-service differentials, and practice expense

This variation is intentional. It reflects policy decisions rather than market negotiation. Critically, Medicare pricing is transparent, predictable, regularly updated, and well documented.

Effective benchmarking doesn’t attempt to flatten differences across provider types or sits of care.. Instead, it uses Medicare’s known reimbursement structure as a reference framework to contextualize commercial rates in a way that policymakers, actuaries, and healthcare economists already understand. In the case of outpatient services lines, as shown below, it also accurately reflects place of service differences in Medicare reimbursement we would similarly expect in commercial pricing.

The Takeaway

Medicare benchmarking persists because it works.

Even as commercial contracting grows more complex, Medicare continues to provide a stable, interpretable baseline for evaluating rate dispersion across service lines and markets. Furthermore, states, employers, and other payers are increasingly directly contracting as a multiple of Medicare pricing, in a contracting approach known as Medicare reference-based pricing. For organizations trying to understand whether prices are “high” or “low,” noisy dollar amounts are rarely enough. Context matters, and while aspects such as stop loss, carve-outs, or quality incentive payments may impact plan design and evaluation, fee schedule-comparability to traditional Medicare remains the most broadly applicable, reliable value framework the US healthcare system has.

Explore how price transparency data evolved in 2025

This post draws from our State of the Data Report, which examines how payer- and hospital-posted price transparency data changed over the course of 2025, and what those changes mean for decision-making across the healthcare ecosystem.

The report covers:

• How payer disclosures, coverage, and consistency shifted throughout the year
• Where price transparency data is most reliable, and where interpretation breaks down without enrichment
• What claims show us about drug treatment costs when paired with TiC data
• How employers, plans, TPAs, and analytics teams are applying this data in practice

Read the State of the Data Report to see the full analysis.

Further Reading

• Baselining Price Transparency Data to Medicare - A technical walkthrough of how commercial dollar rates from machine-readable files can be normalized to Medicare across inpatient, outpatient, physician, and anesthesia services—accounting for conversion factors, case rates, and CMS fee-schedule nuance.
• RAND Price Transparency Initiative - An ongoing effort from the non-profit RAND organization to measure and publicly report the prices paid for hospital care. RAND works with employers and other payers to compares hospital prices at the hospital- and service-line level, the only effort of its scale, while leveraging traditional Medicare rates as a benchmark. 
• Kaiser Family Foundation Literature Review - A 2020 review of the academic and policy literature on Medicare benchmarking from the KFF, including prior estimates of commercial rate variability across inpatient and outpatient services.