There isn’t much correlation between Medicare spending and spending on privately-insured beneficiaries according to a study released Tuesday, disproving a claim President Barrack Obama made while promoting the Affordable Care Act in 2009.
According to the report, titled “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured,” information collected on Medicare has largely impacted the country’s health-care policy as data on private plans was not widely available.
Using data collected by the Health Care Pricing Project on the private health sector’s spending, the authors of the study — Zack Cooper of Yale University, Stuart Craig of University of Pennsylvania, Martin Gaynor of Carnegie Mellon University and John Van Reenen of the Centre for Economic Performance — found variations in Medicare spending were highly contingent on the quality of care whereas price variation between the United State’s 306 Hospital Referral Regions was the key component in spending discrepancies for those with private insurance plans.
“Sixty percent of the population has private health insurance, which pays for a third of health care spending (Hartman et al. 2015),” the study reads. “However, because of poor data availability, most of the analysis of U.S. health care spending has relied on Medicare data (Medicare covers Americans age sixty-five and over as well as individuals with a subset of disabilities).”
As The New York Times first noted, Obama touted Grand Junction, Colo., as an example of a city that saw “better results while wasting less money,” but the study proves just the opposite.
While Grand Junction may have had the third lowest spending rate on Medicare in the country in 2011, it also ranked ninth in highest inpatient prices and in the top 50 on highest spending for privately insured beneficiaries.
“This idea that if the entire country turned into Grand Junction, that we’d suddenly save 20 percent on health spending, maybe that’s not totally true,” health economist Jonathan Skinner told the paper. “Prices are a real problem.”
Similar results were seen in regions cited by politicians including Rochester, Minn., and La Crosse, Wis.
Lack of competition was listed as a major cause of high prices for the privately insured, with researchers finding markets with less than four hospitals having 15.3 percent higher costs. According to the Heritage Foundation, a Washington-based conservative think tank, the Affordable Care Act has encouraged hospitals to consolidate.
The study also found rates for procedures through Medicare remained relatively stable and they varied more for private insurance companies who negotiated prices.
The authors said actions like making hospital prices public could lead to more informed consumers and help drive costs down.
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