US commercial insurers pay 254% of Medicare for the same hospital procedures

The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD. That gap is roughly $3 trillion per year.

This project finds it, one issue at a time. Each issue identifies one fixable problem, quantifies the waste from primary federal data, and recommends a specific policy fix. All code is open-source. Anyone can reproduce the analysis.

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Medicare Part D pays prescription prices for drugs available cheaply over-the-counter. Step therapy reform — requiring OTC equivalents before prescription coverage activates — would redirect roughly $0.6 billion per year in unnecessary spending.

Read the full analysis → issue_01/newsletter_issue_01_FINAL.md

cd issue_01

# One-time environment setup
chmod +x 01_setup.sh && ./01_setup.sh
source .venv/bin/activate

# Download CMS Part D data (~200 MB)
python 02_download_data.py

# Build local DuckDB database
python 03_build_database.py

# Run analysis
python 04_analyze.py

# Generate charts
python 05_visualize.py

• OTC unit prices sourced from current retail at major US pharmacies (March 2026)
• 30-unit-per-claim approximation; see issue_01/VALIDATION_REPORT.md for full methodology
• Savings figures are conservative — do not account for PBM rebates or dispensing fees

Medicare pays 7–25× more than peer nations for the same brand-name drugs. International reference pricing — benchmarking Medicare negotiations against what Germany, France, Japan, UK, and Australia pay — would save approximately $25 billion per year.

Read the full analysis → issue_02/newsletter_issue_02_FINAL.md

cd issue_02

# Build reference price dataset (NHS Drug Tariff + RAND international averages)
python 01_build_reference_data.py

# Generate charts
python 02_visualize.py

• Medicare figures are gross cost (pre-rebate) from CMS Part D Public Use File
• ~49% net rebate adjustment applied for top-spend brand drugs, triangulated from MedPAC and Feldman et al.
• NHS prices are post-patent generic reimbursement rates — representing the molecule's commodity price
• International average = Peterson-KFF 11-country OECD analysis

Commercial insurers pay 254% of Medicare rates for identical hospital procedures. A hip replacement costs $29,000 in the US and under $11,000 in most peer nations. Capping commercial hospital payments at 200% of Medicare — the mechanism already used by Montana Medicaid and thousands of self-insured employers — would save approximately $73 billion per year.

Read the full analysis → issue_03/newsletter_issue_03.md

cd issue_03

# Build HCRIS cost report dataset and compute cost-to-charge ratios
python 01_build_data.py

# Generate charts
python 02_visualize.py

• Savings formula: $528B commercial hospital spend × 65% addressable × 21.3% price reduction (254%→200% of Medicare) = $73B
• 3,193 hospitals analyzed from raw HCRIS FY2023 federal cost reports
• Median markup in nonprofit hospitals: 3.96× actual operating costs; 37% of all hospitals charge 3× or more
• Fix mechanism (Commercial Reference Pricing) is already implemented in Montana and by thousands of self-insured employers
• No overlap with Issues #1 or #2 (those cover drug prices only; this covers hospital/procedure prices)

Through 3 issues: ~$98.6 billion in identified savings

Issue #4 examines pharmacy benefit managers — the largely invisible intermediaries who process 80% of US prescriptions and extract billions through spread pricing, rebate opacity, and formulary manipulation. Subscribe on Substack to get it when it drops.

Every analysis uses primary sources: CMS cost reports, Part D claims data, OECD health statistics, RAND pricing studies. Every number has a citation. Every script is reproducible from a clean clone. Caveats are named explicitly. The math is the argument.

Built by Andrew Rexroad. Questions, corrections, or data tips: vonrexroad@gmail.com