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    What’s behind wide-scale hospital price variations?

    A recent study, “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” has challenged the premise that Medicare should set the pace for healthcare spending. With only 16% of the U.S. population covered by Medicare, extrapolation might need another look.

    The report examines variation in total and inpatient health spending within and across geographic areas for the privately insured and why it exists, and analyzes how the prices of healthcare services affect spending levels. Besides finding major differences in spending in Medicare compared to private insurance, the study shows wide variations in the private sector within the same city, in the same state and across the country for the same procedures.

    Cowritten by four academics—Zack Cooper at Yale University; Martin Gaynor, Carnegie Mellon University; Stuart Craig, Wharton School of the University of Pennsylvania; and John Van Reenen, London School of Economics—the report looks at 92 billion health insurance claims from 2007 to 2011 from 88 million people covered by Aetna, Humana and UnitedHealthcare in all 306 hospital referral regions (HRRs) in the country. That represents nearly 30% of people in the United States with employer-sponsored or private insurance.

    Last year, a family of four would have spent an average of $17,545 for health insurance, which is the price of a Toyota Corolla. That means that every four-member family is expected to buy a new Toyota each year, says Cooper.

    He says that access to data in the private insurance marketplace provided an opportunity to analyze why there are such high costs.

    Next: The report's key findings

     

    Mari Edlin
    Mari Edlin is a frequent contributor to Managed Healthcare Executive. She is based in Sonoma, California.

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