New report finds wide variation in health care costs among states

Joseph Burns

About Joseph Burns

Joseph Burns (@jburns18), a Massachusetts-based independent journalist, is AHCJ’s topic leader on health insurance. He welcomes questions and suggestions on insurance resources and tip sheets at joseph@healthjournalism.org.

Consumers in states with high health care costs spend more than twice as much for certain services than consumers in other states, according to a new report from the Health Care Cost Institute.

Using health insurance claims, HCCI researchers also showed that among Americans enrolled in commercial health insurance plans, consumer prices for health care services vary by threefold within states.

Researchers David Newman, Stephen T. Parente, Eric Barrette and Kevin Kennedy found that Alaska had the highest average health care prices when compared with the national average, followed by Wisconsin, North Dakota, New Hampshire and Minnesota. More than 20 percent of health care services in New Hampshire and Wisconsin are priced at twice the national average price, they said.

The low-cost states were Arizona, Florida, Maryland and Tennessee, where more than 90 percent of health care services were priced lower than the national average.

At HCCI, Newman is the executive director, Barrette is the director of research and Kennedy is a research assistant. Parente is an associate dean and professor of finance at the Carlson School of Management at the University of Minnesota.

Published in Health Affairs online Wednesday, the research showed differences in prices for 242 common medical services in 41 states and the District of Columbia. There was not enough data to show how prices compared in nine states: Alabama, Arkansas, Hawaii, Idaho, Michigan, Montana, South Dakota, Vermont and Wyoming. In addition to the article in Health Affairs, HCCI produced a 178-page report on the research, “National Chartbook of Health Care Prices–2015.” Data from the report also are available on Guroo.com, HCCI’s price transparency website.

HCCI divided the report into three sections. In the first section are 242 color-coded national maps showing how state average prices vary nationwide. In West Virginia, for example, the cost of an average tonsillectomy is 47 percent higher than the cost of the same procedure in Maryland. In the second section, HCCI summarized how the prices in each state compare with the national average price. In the third section, HCCI showed the mean and standard deviation of each state’s average prices relative to the national average prices.

In a press release accompanying the report, HCCI said some price variation may be the result of differences in wages or rent, but most likely is due to market power or other factors such as a lack of price transparency or fewer alternative treatment options. Citing an Institute of Medicine report in 2013, Variation in Health Care Spending: Target Decision Making, HCCI said price variation for the commercially insured results when physicians, hospitals and other providers mark up prices due to their market power within hospital referral regions. More research is needed on the forces that affect prices, such as why prices for the same service differ widely within a few miles and what amount of variation is justifiable, the institute added.

Data for the research comes from commercial claims from three of the nation’s largest health insurers: Aetna, Humana, and UnitedHealthcare. Claims data show actual payments to providers, including patients’ copayments, deductibles and coinsurance. We have reported here, here and here on other research HCCI has funded from this data set.

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