More From McAllen: Medicare, Private Insurers and Containing Costs

Last year, Atul Gawande wrote an article in The New Yorker that was probably quoted more often in the health reform debate than any other news item.  He looked at McAllen, Texas, which he called “one of the most expensive healthcare markets in the country,” because its $15,000-per-beneficiary Medicare costs in 2006 were more than double the national average.

In a study published this week by Health Affairs, researchers from the University of Texas and Dartmouth College have found that the same high-spending issues connected to Medicare patients do not extend to the under-65 population with coverage from private plans.  To conduct the study, the researchers utilized 2008 claims data from Blue Cross Blue Shield of Texas, the state’s largest private insurer.

The comparisons are striking.  For Medicare patients, inpatient care spending in McAllen is 63 percent higher than in nearby El Paso and more than four times greater for home healthcare.  Yet, for the under-65 patient population, spending on professional and inpatient services in McAllen and El Paso is virtually even, and spending in McAllen for outpatient services is even 31 percent less than that in El Paso.

In looking for reasons for the disparity, the study authors point to utilization mechanisms that private insurers rely upon.  For example, Blue Cross Blue Shield of Texas (which, to be completely transparent, is administered by the Health Care Service Corporation, a Healthcare Leadership Council member), encourages participation in disease management programs for patients with expensive chronic illnesses.  They also encourage providers to practice evidence-based medicine.  Medicare, by contrast, exercises comparatively little utilization management.

This study in Health Affairs is extremely valuable as policymakers consider how to address the cost challenges in the healthcare system and how to make the Medicare program more cost-effective.