Low Private Insurance Payments May Lead To Increased Medicare Spending

Dr. John Romley PhD Schaeffer Center for Health Policy and Economics Sol Price School of Public Policy, University of Southern California Los Angeles, CAMedicalResearch.com Interview with:
Dr. John Romley PhD
Schaeffer Center for Health Policy and Economics
Sol Price School of Public Policy, University of Southern California
Los Angeles, CA

MedicalResearch: What is the background for this study? What are the main findings?

Dr. Romley: We’ve known for a long time now that there is tremendous variation in how much Medicare spends across the country, and that these differences are not necessarily related to quality of care.  Researchers have devoted great time, energy and intellect to understanding the drivers of Medicare spending.  While progress has been made, our understanding remains limited.  We also have had less insight into how private health care varies across the country.

We used new information on how much private health plans pay health care providers over and above cost, and found that areas with low private payment levels tended to have substantially higher Medicare spending and utilization.

MedicalResearch: What should clinicians and patients take away from your report?

Dr. Romley: The pattern we documented is consistent with a theory of how providers behave, namely, that physicians are able to leverage their expertise to order up some care which is financially rewarding, but of modest benefit to patients.

MedicalResearch: What recommendations do you have for future research as a result of this study?

Dr. Romley: A negative relationship between private payment and Medicare utilization does not necessarily represent cause-and-effect.  Future research needs to carefully address the issue of causation, and moreover to consider our health-care system as a whole when assessing the performance of any particular segment of the system.

Citation:

Romley, J. A., Axeen, S., Lakdawalla, D. N., Chernew, M. E., Bhattacharya, J. and Goldman, D. P. (2014), The Relationship between Commercial Health Care Prices and Medicare Spending and Utilization. Health Services Research. doi: 10.1111/1475-6773.12262

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