Study: Payer-specific factors drive regional health care spending

Variances in regional health care spending are not limited to either private or public payers

Researchers at Yale, Stanford, and Dartmouth did a nationwide small-area analysis of spending by Medicare, Medicaid, and private insurers, looking to see if there are certain regions that have low spending from all three or whether other factors drive spending. Medicare, Medicaid, and private insurers covered 14.2%, 19.8%, and 49.6% of the country’s population in 2019, respectively.

The study, published in JAMA Network Open, analyzed spending data for more than 100 million individuals and shows that while health spending per payer varies significantly across regions, there are almost no regions that have simultaneously low spending by Medicare, Medicaid, and private insurers or that have universally high spending across all three payers.

The researchers said that distinct factors appear to be driving the regional variations across each payer segment. This is significant because in the past, policymakers have identified efficient health systems by regions based solely on Medicare. The data in the study shows that policymakers cannot understand regional performance without looking at all three payer segments.

What a region spent on the privately insured had a low correlation (21%) with what was spent in the region on Medicaid recipients and a 2% correlation with what was spent on Medicare recipients, the study found. There was also only a 16% correlation between what a region spent on the Medicaid program and what was spent on the Medicare program.

Researchers say this illustrates that the U.S. has the equivalent of three different health systems, and to increase efficiency, payer-specific policies will need to be developed.

According to the study, Medicaid and privately insured populations exhibited more variation in spending across regions than the Medicare population. Prices for care paid for by private insurers and Medicaid are generally market-driven and vary substantially across regions, while the federally administered Medicare program relies on regulated payments to health care providers.

There was substantial correlation in the regional utilization of health care services across payers, according to the study. Spending wasn’t strongly correlated across the payers, but utilization of care was.

The variations in spending by each segment are specific to each main payer. For private insurance, regions with high prices tend to have high spending. For Medicare, regions with higher spending have more specialist physicians per capita. For Medicaid, regions with higher spending have more hospital beds and births per capita, according to the researchers.