Insurance Payments Tied to Medicare Intrigue States, Employers

States and private employers are moving ahead with initiatives to peg insurance payments to what Medicare pays despite a recent setback in North Carolina.

All but a handful of North Carolina’s hospitals refused to take part in a plan by the state treasurer that would have paid them nearly double what Medicare pays. But advocates of setting rates using Medicare as a reference still see it as a powerful tool to bring down spiraling costs.

The fight in the Tar Heel State is a likely harbinger of battles between health-care providers, who argue that Medicare rates are too ...