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Paul Zimmerman

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Medicare Data Not Indicative of Overall Healthcare Spending Costs

In December 2015, a  research team at Carnegie Mellon published a paper titled “Examining the Variation in Health Spending and in Hospitals’ Transaction Prices” after receiving access to insurance claims data from Aetna, Humana, and United.

The team used insurance claims data for 27.6 percent of individuals with private employer-sponsored insurance in the US between 2007 and 2011 to examine the variation in health spending and in hospitals’ transaction prices.

The big takeaway is that Medicare data is not indicative of overall healthcare spending costs. This has dramatic policy considerations. According to the New York Times, in promoting the Affordable Care Act (“ACA”), President Obama stated that Grand Junction, Colorado was an example of a community with better and cheaper healthcare. Thus, he opined that the rest of the nation should follow suit. This viewpoint was based on the fact that Grand Junction spent less money on Medicare costs, and still had strong health outcomes.  However, the new report shows that Grand Junction is one of the most expensive healthcare markets in the country for private insurance.  

For a more local perspective, the report shows that in Los Angeles, Medicare spending is among the highest in the country, but private insurance costs are average. 

The report clearly indicates that looking at Medicare costs in isolation fails to provide an accurate picture of overall healthcare costs in a particular region. Specifically, simply because a region spends less on Medicare does not necessarily mean that healthcare costs will be lower. Thus, there is further evidence that Medicare rates provide little context for commercial rates in a geographic region. 

To read more from the study, click here 

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.