For years, we’ve heard that health care in our region is low cost (at least by comparison) and high quality. Turns out, that may be true for those who receive Medicare, but not necessarily for the rest of us.

A recent study, profiled in a New York Times article whose title I borrowed for this column, shines a light on the significant variation in health care costs and the importance of knowing the source of the underlying data. This link takes you to a map of the United States and the article which is customized based on your location. This study provides an important, and until now largely unavailable, perspective on the differences in “unit prices” of health care paid by Medicare versus those of us who are commercially insured (employers and their employees).

Headlines include:

healthcare spending
  1. Places that spend less on Medicare do not necessarily spend less on health care overall. In some regions, lower costs for Medicare appear to be achieved at the expense of the rest of the market through cost-shifting. However, in other markets, costs are low for both Medicare and the commercial market. The Institute of Medicine estimates that nearly one-third of what we spend on health care is unnecessary or poor quality care. Surely, there is room for real cost reduction across the board without resorting to cost shifting from one group to another.
  2. Places that treat Medicare patients more efficiently tend to be more efficient in treating privately insured patients too. Efforts to reduce unnecessary care appear to be applied to all patients. That’s good news! However, the gains made by improvements in care delivery are muted when the “unit prices” are so much higher.
  3. Monopoly markets, on average, have higher costs than markets where there is competition. Just like in other industries, monopolies tend not to be good for consumers. This raises questions and concerns about the growing level of consolidation in both the provider and insurer/carrier markets in this post Affordable Care Act era.

This study reminds us of the importance of knowing the data behind the headlines; we can’t assume that, as Medicare goes, so goes the rest of the market. It also raises important market and policy questions. How do hospitals and clinicians in some markets manage to hold down costs for both Medicare and other payers? What can we learn from them? How can we make these cost differences more visible, thereby creating public accountability?

Cheryl DeMars

Cheryl DeMars

President & CEO at The Alliance
Cheryl DeMars joined The Alliance in 1992, assuming several roles before becoming CEO in December 2006. Cheryl works with the Board of Directors and senior leadership team to establish the strategic direction of the cooperative.

Cheryl participates in a number of national and regional initiatives that align with The Alliance’s mission of controlling costs, improving quality and engaging individuals in their health. She is a board member and former chair of the National Business Coalition on Health. She serves on the Advisory Board of the Wisconsin Population Health Institute and the board of the Wisconsin Collaborative for Healthcare Quality.

Prior to joining The Alliance, Cheryl was a program manager at Meriter Hospital in Madison. She earned a master's degree in social work from the University of Wisconsin-Madison.

Read blog posts by Cheryl.
Cheryl DeMars

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