The Relationship between Commercial Health Care Prices and Medicare Spending and Utilization

Marginalized two part model for analyzing multilevel semicontinuous medical costs in Iranian households

Medical costs (MCs) represent a significant burden on household finances and often lead to economic challenges. This study analyzed the data of 8,993 Iranian households from 2021 collected by the Iranian Statistical Center. Using a marginalized two-part model (MTP) with lognormal and gamma distributions, the relationship between MCs and factors such as age, gender, education, and household characteristics was examined. A two-level structure was applied to account for heterogeneity across provinces, with analyzes performed using R software. The mean annual MC was $180 with high variability (SD = $324.39). The main determinants included family size, residence area, education level, and socioeconomic status. Single households and families with more students had lower MCs. Among the models evaluated, the MTP-Lognormal model (MTP-LN) performed better than the MTP-Gamma model (MTP-G), as it provided better predictive accuracy and better reflected cost differences between province. These results highlight the socio-economic and demographic factors that influence household MCs in Iran. The MTP-LN model provides valuable insights for identifying at-risk groups and developing targeted interventions to reduce the financial burden of healthcare, especially for vulnerable populations. This study emphasizes the importance of tailored interventions to address regional inequalities and promote equitable access to healthcare.

Commercial Prices and Care for Medicare Beneficiaries With Prostate Cancer

OBJECTIVE

To examine the relationship between market dynamics, in the form of commercial prices paid to urologists, and utilization of services, as measured by Medicare spending, in men with newly diagnosed prostate cancer.

METHODS

We performed a retrospective national cohort study of Medicare beneficiaries with newly diagnosed prostate cancer between 2014 and 2019, with follow-up through 2020. The primary exposure was the commercial price index (ie, the ratio of commercial prices to Medicare prices for a common set of services performed by urologists). The primary outcome was Medicare spending for prostate cancer in the 12-month period after diagnosis.

RESULTS

Across zip codes, commercial prices were, on average, 190% of Medicare prices (range 102%-421%), with mean spending per beneficiary of $16,704. There was an inverse relationship between the price index and Medicare spending for men for prostate cancer. Specifically, standardized Medicare spending was $1485 (95%CI $939 to $2030) higher per beneficiary among those managed in zip codes at the bottom decile for commercial prices compared to the top decile. This effect was similar in the subgroup of men who underwent treatment, where standardized Medicare spending was $1461 (95%CI $848 to $2073) higher per beneficiary among those managed in zip codes in the bottom decile for commercial prices compared to the top decile.

CONCLUSION AND RELEVANCE

Commercial prices for a set of frequently performed services are substantial higher than those paid by Medicare and vary widely across zip codes. Higher commercial prices were associated with significantly lower utilization, as measured by standardized Medicare spending, in men with newly diagnosed prostate cancer.

Reimbursement for Orthopaedic Surgeries in Commercial and Public Payors: A Race to the Bottom

INTRODUCTION

The purpose of this study was to compare surgeon professional fee reimbursement and trends from Medicare versus commercial payors for inpatient orthopaedic surgeries: total knee arthroplasty (TKA), total hip arthroplasty (THA), total shoulder arthroplasty (TSA), anterior cervical diskectomy and fusion (ACDF), and posterior lumbar fusion (PLF).

METHODS

Patients undergoing TKA, THA, TSA, single-level ACDF, and single-level PLF from 2010 to 2018 were queried in a commercially insured claims database. Medicare reimbursements and the work relative value unit (wRVU) of each procedure were obtained from the Medicare Physician Fee Schedule. All costs were adjusted for inflation and reported in 2018 real dollars. Compound annual growth rates were calculated to assess the mean growth rate for each procedure. Linear regression was done to assess trends.

RESULTS

On average, payments from Medicare were 57% less than payments from commercial payors. From 2010 to 2018, both Medicare and commercial payments decreased significantly for each surgery (P < 0.05 for all). Compared with inflation-adjusted commercial payments, Medicare payments decreased 2.1 times faster for TKA (-2.1% versus -1.0%), 2.8 times faster for THA (-1.4% versus -0.5%), 1.3 times faster for TSA (-1.0% versus -0.8%), and 1.9 times faster for ACDF (-1.1% versus -0.6%). PLF was the only procedure for which Medicare payments declined slower than commercial payments (-0.6% versus -1.21%). Medicare payments per wRVU markedly declined for TKA (-0.83%), THA (-0.80%), TSA (-0.75%), and ACDF (-1.10%), whereas commercial payments per wRVU for those surgeries showed no notable change. For PLF, there was a notable decrease in both Medicare (-0.63%) and commercial (-1.21%) payments per wRVU.

CONCLUSION

Over the past decade, both commercial and Medicare surgeon payments for commonly performed inpatient orthopaedic surgeries decreased markedly, with Medicare payments decreasing an average of 1.5 times faster than commercial payments. The impact of declining reimbursements on access and quality of care merits additional investigation.

Health Care Utilization and Spending for Children With Mental Health Conditions in Medicaid

OBJECTIVE

To examine how characteristics vary between children with any mental health (MH) diagnosis who have typical spending and the highest spending; to identify independent predictors of highest spending; and to examine drivers of spending groups.

METHODS

This retrospective analysis utilized 2016 Medicaid claims from 11 states and included 775,945 children ages 3 to 17 years with any MH diagnosis and at least 11 months of continuous coverage. We compared demographic characteristics and Medicaid expenditures based on total health care spending: the top 1% (highest-spending) and remaining 99% (typical-spending). We used chi-squared tests to compare the 2 groups and adjusted logistic regression to identify independent predictors of being in the top 1% highest-spending group.

RESULTS

Children with MH conditions accounted for 55% of Medicaid spending among 3- to 17-year olds. Patients in the highest-spending group were more likely to be older, have multiple MH conditions, and have complex chronic physical health conditions (P <.001). The highest-spending group had $164,003 per-member-per-year (PMPY) in total health care spending, compared to $6097 PMPY in the typical-spending group. Ambulatory MH services contributed the largest proportion (40%) of expenditures ($2455 PMPY) in the typical-spending group; general health hospitalizations contributed the largest proportion (36%) of expenditures ($58,363 PMPY) in the highest-spending group.

CONCLUSIONS

Among children with MH conditions, mental and physical health comorbidities were common and spending for general health care outpaced spending for MH care. Future research and quality initiatives should focus on integrating MH and physical health care services and investigate whether current spending on MH services supports high-quality MH care.

Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spendingf

There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35 percent of spending for end-of-life care and 12 percent of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence. (JEL D83, H75, I11, I18).

The Influence of Physician Payments on the Method of Breast Reconstruction: A National Claims Analysis

BACKGROUND

Flap-based breast reconstruction demands greater operative labor and offers superior patient-reported outcomes compared with implants. However, use of implants continues to outpace flaps, with some suggesting inadequate remuneration as one barrier. This study aims to characterize market variation in the ratio of implants to flaps and assess correlation with physician payments.

METHODS

Using the Blue Health Intelligence database from 2009 to 2013, patients were identified who underwent tissue expander (i.e., implant) or free-flap breast reconstruction. The implant-to-flap ratio and physician payments were assessed using quadratic modeling. Matched bootstrapped samples from the early and late periods generated probability distributions, approximating the odds of surgeons switching reconstructive method.

RESULTS

A total of 21,259 episodes of breast reconstruction occurred in 122 U.S. markets. The distribution of implant-to-flap ratio varied by market, ranging from the fifth percentile at 1.63 to the ninety-fifth percentile at 43.7 (median, 6.19). Modeling the implant-to-flap ratio versus implant payment showed a more elastic quadratic equation compared with the function for flap-to-implant ratio versus flap payment. Probability modeling demonstrated that switching the reconstructive method from implants to flaps with a 0.75 probability required a $1610 payment increase, whereas switching from flaps to implants at the same certainty occurred at a loss of $960.

CONCLUSIONS

There was a correlation between the ratio of flaps to implants and physician reimbursement by market. Switching from implants to flaps required large surgeon payment increases. Despite a relative value unit schedule over twice as high for flaps, current flap reimbursements do not appear commensurate with physician effort.

Medicare Advantage Plans Pay Hospitals Less Than Traditional Medicare Pays

There is ongoing debate about how prices paid to providers by Medicare Advantage plans compare to prices paid by fee-for-service Medicare. We used data from Medicare and the Health Care Cost Institute to identify the prices paid for hospital services by fee-for-service (FFS) Medicare, Medicare Advantage plans, and commercial insurers in 2009 and 2012. We calculated the average price per admission, and its trend over time, in each of the three types of insurance for fixed baskets of hospital admissions across metropolitan areas. After accounting for differences in hospital networks, geographic areas, and case-mix between Medicare Advantage and FFS Medicare, we found that Medicare Advantage plans paid 5.6 percent less for hospital services than FFS Medicare did. Without taking into account the narrower networks of Medicare Advantage, the program paid 8.0 percent less than FFS Medicare. We also found that the rates paid by commercial plans were much higher than those of either Medicare Advantage or FFS Medicare, and growing. At least some of this difference comes from the much higher prices that commercial plans pay for profitable service lines.

Association Between Cardiorespiratory Fitness and Health Care Costs: The Veterans Exercise Testing Study

OBJECTIVE

To determine the association between cardiorespiratory fitness (CRF) and annual health care costs in Veterans.

PATIENTS AND METHODS

The sample included 9942 subjects (mean age, 59±11 years) undergoing a maximal exercise test for clinical reasons between January 2005 and December 2012. Cardiorespiratory fitness, expressed as a percentage of age-predicted peak metabolic equivalents (METs) achieved, was categorized in quartiles. Total and annualized health care costs, derived from the Veterans Administration Allocated Resource Center, were compared using multiple regression, controlling for demographic and clinical characteristics.

RESULTS

A gradient for reduced health care costs was observed as CRF increased, with subjects in the least-fit quartile having approximately $14,662 (P<.001) higher overall costs per patient per year compared with those in the fittest quartile, after controlling for potential confounding variables. Each 1-MET higher increment in fitness was associated with a $1592 annual reduction in health care costs (5.6% lower cost per MET), and each higher quartile of fitness was associated with a $4163 annual cost reduction per patient. The effect of CRF was more pronounced among subjects without cardiovascular disease (CVD), suggesting that the results were not driven by the possibility that less-fit individuals had greater CVD. Cost savings attributable to higher fitness were greatest in overweight and obese subjects, with lower savings observed among those individuals with a body mass index less than 25 kg/m². In a model including historical, clinical, and exercise test responses, heart failure was the strongest predictor of health care costs, followed by CRF (P<.01).

CONCLUSION

Low CRF is associated with higher health care costs. Efforts to improve CRF may not only improve health but also result in lower health care costs.