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Geographic Variation in Commercial Health Spending

By August 11, 2011Commentary

Thomson Reuters has added to the research on geographic variation in health spending by examining its databases of commercial insurance claims.  Some of these claims include seniors under employer retiree medical plans, as well as adults and children.  The analysis did not adjust for health status and other factors, but Thomson said they will release a revised version of the research in the future which includes those adjustments.  The format for the work was to look at about 382 metropolitan statistical areas and compare spending in various categories like inpatient, outpatient and drug, across three age groups-over 65, adults and children.    (TR Report) This is important work because so much of the geographic variation research has been done solely on Medicare fee-for-service spending.

The lowest annual average total spending was found in Ogden, Utah at $2623, with Dubuque, Iowa at $2719 in second, followed by Fayetteville and Fort Smith, Arkansas, and Laredo, Amarillo and McAllen, Texas.  Note that McAllen was featured as a very high-spending Medicare area in the well-known New Yorker article, but appears to have very low costs in the commercial population, although this analysis also finds it to have high senior spending.  The highest cost area was Anderson, Indiana at $7231 per year or over twice, actually close to three, times low-spending Ogden.  Other high areas were Punta Gorda, Florida, Racine, Wisconsin, Naples, Florida and Ocean City, New Jersey.  Interestingly, none of the ten highest or lowest areas is what would be considered a major city, with the possible exception of Salt Lake City.

There can be a fair amount of variation in rank by age category, so that the highest spending on adults doesn’t necessarily mean there will be high spending on children.  The highest levels of correlation across age groups was for drug spending, which was moderately correlated, with much lower levels of correlation for medical spending.   Looking at categories of spending, inpatient and outpatient spending had fairly good correlation, especially among seniors, which would suggest that more outpatient use and access doesn’t necessarily lower inpatient use.  There was, however, a lower correlation between drug and total other medical spending, which would suggest that more use of drugs may tend to lessen use of other health services.  The adjusted version of the research will be helpful and combining all data across all payers would really be the crucial piece of research.


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