WASHINGTON – The main factors contributing to regional differences in private healthcare spending are health status and hospital prices, says a new report released today from the Center for Studying Health System Change (HSC) for the nonpartisan, nonprofit National Institute for Health Care Reform (NIHCR).
Based on claims data for 218,000 active and retired nonelderly unionized autoworkers and their dependents, the study, “Health Status and Hospital Prices Key to Regional Variation in Private Health Care Spending,” found that health spending per enrollee in 2009 varied widely across 19 communities with large concentrations of autoworkers, from a low of $4,500 in Buffalo, N.Y., to a high of $9,000 in Lake County, Ill.
“This population was studied for a couple reasons,” said Chaplin White, PhD, an HSC senior researcher. “First, it’s a large population of privately insured, and we don't know nearly as much about geographic variation in spending among the privately insured as we do among Medicare beneficiaries. Second, the benefit design is more or less uniform across communities, so any differences that we observe in spending are either due to something about the enrollees (older, sicker, etc.) or something about medical providers (higher prices, more intensive treatment patterns).”
“The study documents that differences in prices – especially for hospital care – play a significant role in regional spending variation for privately insured people,” said White.
About 18 percent of the total variation in spending was a result of unexplained differences in service quantities, with the cost of doing business explaining very little of the price differences, according to White.
“There are unexplained differences in both prices and in quantities,” said White. “The unexplained differences in prices can probably be attributed to the negotiating position of the insurers in a community relative to the medical providers in the community.”
“The unexplained differences in quantities are a bit more of a mystery,” added White. “They can probably be chalked up to differences in providers' ‘practice style’ but from this study it’s not clear what that means. It's trite to say, but more research is needed.”
The study also compared prices paid by the autoworker plan with Medicare prices in three categories of services: physician office visits for evaluation and management services, hospital facility fees for inpatient care and hospital facility fees for emergency department care.
Physician office visits. The prices paid by the autoworker plan for physician office visits, on average, were only 3 percent higher than what Medicare would have paid for the same service.
Hospital inpatient care. The prices for inpatient hospital care paid by the autoworker plan were, on average, 55 percent higher than what Medicare would pay, and the price gap varied widely across communities.
Hospital emergency department care. The prices paid by the autoworker plan for hospital emergency department care were, on average, more than double the Medicare price, and the price gap varied even more widely across communities than for inpatient care.
