New data shows experts were wrong about where healthcare costs less

Researchers analyzed the real prices hospitals negotiate with private insurers and found places that spend less on Medicare do not necessarily spend less on healthcare overall.

The new "Big Data" project from researchers at Carnegie Mellon University, Yale University, University of Pennsylvania and the London School of Economics shows that the prices hospitals negotiate with private health insurers vary significantly within and across geographic regions in the U.S.

For the study, the researchers analyzed 92 billion health insurance claims from 88 million people covered by three of the nation's largest health insurance companies: Aetna, Humana and UnitedHealthcare. The data was provided by the Health Care Cost Institute and represents spending and utilization for about 30 percent of individuals in the U.S. with employer-sponsored health coverage.

The study shows spending patterns for the privately insured aren't the same as those for Medicare, which may cause policy makers to reexamine some of the markets that have been lauded for their healthcare models.

Grand Junction, Colo., has received a great deal of attention for its "better, cheaper healthcare," according to The New York Times. That's because academic work showed Grand Junction was one of the lowest-cost markets in the nation based on Medicare spending, and the community kept costs low without detriment to people's health.

However, the new study shows the attention Grand Junction received may have been misplaced, as there is only a 14 percent correlation between spending on Medicare beneficiaries and spending on the privately insured. For example, in 2011, Grand Junction had the third-lowest Medicare spending per beneficiary among the nation's 306 hospital markets, but the ninth highest inpatient prices and the 43rd highest spending per privately insured beneficiary.

Grand Junction isn't an anomaly. Many other regions cited by policy makers as models for the nation for their low Medicare spending, such as Rochester, Minn., and La Crosse, Wis., also have extremely high spending for the privately insured.

"Virtually everything we know about health spending and most of the basis for federal health policy comes from the analysis of Medicare data," said Zack Cooper, assistant professor of health policy and economics at Yale. "The rub is that Medicare only covers 16 percent of the population. The majority of individuals — 60 percent of the U.S. population — receive health care coverage from private insurers."

More articles on healthcare finance:

Georgia hospital to reopen after securing last-minute buyer
How Vanderbilt University Medical Center is using clinical evidence to drive down costs
Hospital CFOs' top concerns for 2016






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