More on McAllen’s Costs

Atul Gawande made McAllen, Texas the preeminent example of geographic health utilization and spending variation, which supposedly reflects inappropriate and unnecessary care which was driving up health spending, while not providing better health outcomes.  His research relied mostly on Medicare data.  A new analysis published in Health Affairs suggests that, as usual, there is more to the situation than the initial look revealed.   (Health Affairs Article) The authors looked at commercial plan spending in the area to see if it validated the conclusions found by Gawande using Medicare data.

The researchers used Blue Cross Blue Shield of Texas data on its commercial enrollees and compared it with Medicare data for beneficiaries in the same area.  As in Gawande’s work, the primary comparison was with the El Paso area.  These researchers constructed a Medicare price-neutral index and health status-adjusted the patients being compared in the two areas.  The authors found that Medicare spending in 2007 in McAllen was 86% more than in El Paso and 75% above the national average.  The cost of care was higher in every significant category and Medicare beneficiaries were much more likely to die in a hospital in McAllen and to be seen by multiple physicians in the time period before they died.

A very different story is told by the commercial data on the under-65 population.  There McAllen’s spending and rates of most health care use was lower than El Paso’s, particularly in regard to outpatient services.  Interestingly, this change was confined to the under-50 commercial population.  In the 50-64 age bracket, McAllen was higher cost and higher utilizing.  The researchers discussed various possible explanations for the study results, concluding that the most likely was that commercial insurers are much more aggressive about monitoring utilization than is Medicare.  It appears that providers are aware that when they are treating certain patients, i.e. those covered by private health plans, their decisions will be closely watched, and that for other patients, Medicare beneficiaries, for example, they are free to do what meets their economic needs.  The research validates the general conclusion that physicians are motivated by their economic and financial well-being when making care decisions.