Cleaveland: Deciphering the costs of health care

Cleaveland: Deciphering the costs of health care

January 12th, 2016 by Dr. Clif Cleaveland in Life Entertainment

Depending upon where you live in the United States, your health care costs may vary widely from people in other communities. Since almost all elements of health care lack a visible price tag, the consumer learns of charges only after a service is provided.

If he is fortunate, his health insurance will cover most or all the charges so long as he receives care from providers in the network established by his insurance plan. Regional differences in these costs influence the out-of-pocket expenses of consumers.

Clif Cleaveland

Clif Cleaveland

Photo by Contributed Photo /Times Free Press.

Until recently, these regional variations were calculated almost exclusively from data supplied by the Center for Medicare and Medicaid Services (CMS). This data is gathered and analyzed from the 306 hospital referral regions into which our nation is divided. CMS adjusts payments within each region using a hospital wage index.

This leads to a variance in Medicare payments across the regions by a factor of 2.26. In other words, care in the most expensive region, where wages and other expenses are highest, costs more than twice as much as care in the lowest-priced region.

A study released last month, "The Price Ain't Right: Hospital Pricing and Health Spending on the Privately Insured," by Yale professor Zack Cooper and colleagues (www.healthcarepricingprogject.org), analyzes insurance claims data from 88 million Americans with private health insurance. The study shows a poor correlation between Medicare and private-insurance spending within the hospital referral regions.

Some regions praised for low Medicare costs were found to have high costs for privately insured persons. For example, while ranking among the lowest in per capita Medicare costs, Grand Junction, Colo., ranks among the most costly hospital regions for the privately insured.

The Cooper study offered four conclusions:

' Health care spending on privately insured persons is three times more expensive in the highest-priced hospital referral region than the lowest-priced.

' Pricing of services is the primary determining factor for those differences. In contrast, quantity of services is the primary determining factor for differences in Medicare charges.

' Prices correlate most directly with a hospital's market power. Prices are lowest when four or more hospitals compete within a hospital referral region.

' Comparison of pricing for similar services — hip and knee replacements, Caesarian and vaginal deliveries, coronary angioplasties, diagnostic colonoscopies, and MRIs of leg — showed wide variances. A procedure in one region might be 12 times more costly than the identical procedure in another region. Even within a single hospital referral region, the same procedure might cost twice as much in one hospital than another.

The authors also pointed out that there is little evidence to support that pricier procedures lead to better clinical outcomes.

A story last month in the New York Times — "The Experts Were Wrong About the Best Places for Better and Cheaper Health Care" — provides useful information on how individual hospital referral regions compare with one another. Tennessee, Alabama and Georgia have per capita costs for Medicare recipients that fall in the middle between higher- and lower-priced states. Tennessee and Alabama rank below average in per capita costs for privately insured individuals.

Compared to all hospital referral regions across the nation, Chattanooga ranks 161st for per capita Medicare costs and 64th for the privately insured. Huntsville, Ala., ranks 125th for Medicare, 88th for privately insured. Rome, Ga., ranks 103rd for Medicare, 30th for privately insured.

So what does this mean for an individual patient?

First and foremost, if you are privately insured, make certain that all your referrals, including lab and diagnostic services, are within your insurance plan's network of preferred providers. If you are scheduled for elective surgery, not only the surgeon but the anesthesiologist need to be in your plan's network.

Secondly, for an elective procedure, inquire in advance about choices and costs. These can directly impact the deductibles and co-payments for which you are responsible.

When we shop for appliances and cars, we know in advance how much they will cost. Similar transparency is needed for our health care decisions.

Contact Clif Cleaveland at ccleaveland@timesfreepress.com.


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