McAllen Texas, Revisited: BCBS Saves More Than Medicare

Private insurers, take a bow. A recent study suggests that your mechanisms for utilization review and management are working to control health care spending better than Medicare, and that the differences are sharply defined.

The study, in the December Health Affairs, is a follow-up to a highly publicized 2009 New Yorker article by Atul Gawande, MD. Gawande compared Medicare spending in McAllen and El Paso, Texas and found higher spending in McAllen. The new study, conducted by Luisa Franzini, PhD, and Osama I. Mikhail, PhD, both from the University of Texas, investigated whether this disparity was present in the non-Medicare populations of those two cities, using medical use and expense data for patients privately insured by Blue Cross & Blue Shield of Texas, the state’s largest commercial insurer.

Given that the same providers who care for Medicare patients usually care for privately insured patients, the researchers wanted to see if the pattern of spending was similar for people under age 65.

Gawande used Medicare measures obtained from the Dartmouth Atlas of Health Care. Those measures were adjusted for age, sex, and race, but not for potential differences in the prices Medicare pays per procedure, or for other variables, such as potential differences in health status across the regions.

Franzini’s study used price-adjusted Medicare claims data, which removes all regional differences in prices to construct a price-neutral index of the use of medical services.

Much like Gawande, Franzini found that Medicare spending in McAllen was 63 percent higher than in El Paso for inpatient care, 32 percent higher for outpatient care, and 65 percent higher for Part B professional services.

Gawande noted these differences between the two cities in his article and attributed them to a change in McAllen during the mid-1990s when providers adopted a more pronounced “entrepreneurial spirit” and a “culture of money.”

But in the younger population — under 65, non-Medicare, and insured by the Blues plan — Franzini found that total spending per member, per year wasn’t much different between the two cities. For several categories of spending, its per-capita costs were actually lower in McAllen.

The implication is that Medicare has minimal utilization management and cannot control the overuse of services that Gawande observed in McAllen, whereas BCBS has more robust UM. It kept the McAllen docs and hospitals in line, it would seem.

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