Health Plans: Data Proves that Meddling Works

Jeff Elliott, for HealthLeaders Media, January 5, 2011

Health insurers these days will latch on to any bit of good press. That's why they were giddy about a recent study published in Health Affairs that indicated private insurance plans control healthcare costs better than Medicare.

The caveat: data to support this was generated from a study of just two Texas cities. In an effort to uncover the wide disparity in healthcare spending between McAllen and El Paso—first reported in a 2009 New Yorker article claiming that Medicare spending was drastically higher in McAllen—University of Texas researchers Luisa Franzini, Osama Mikhail, and Jonathan Skinner found that a private insurer was able to suppress costs in McAllen better than Medicare.

"Although spending per Medicare member per year was 86 percent higher in McAllen than in El Paso, total spending per member per year in McAllen was 7 percent lower than in El Paso for the population insured by Blue Cross Blue Shield of Texas," the study concluded.

According to Franzini, aggregate expenditures per capita for BCBS were roughly the same for McAllen and El Paso, given the Medicare differential. "And even though the inpatient utilization was much higher in McAllen than El Paso for the 50-65 age group, it was partially offset by much lower outpatient expenditures, which in turn brought the total expenditure gap between McAllen and El Paso down to a 23 percent differential," she said.

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