Comparing variation in Medicare and private insurance spending in Texas

Objectives: A great deal of research has documented the wide variation in Medicare spending across different geographic regions in the US. However, little research has been done on spending variation in the commercial sector. The objectives of this paper are (1) to compare variations in spending and inpatient utilization in the Blue Cross Blue Shield of Texas (BCBSTX) population and the Medicare population across 32 Texas regions and (2) to investigate if the pattern of widely varying Medicare spending but similar BCBSTX spending found in a previous analysis of El Paso, TX and Hidalgo/McAllen, TX exists across the state. Study design: Retrospective study using 2008 data on 2,440,806 BCBSTX members and 1,921,377 Medicare fee-for-service enrollees. We used total spending per member/enrollee per month and inpatient admissions per 1000 members/enrollees. Methods: After adjusting BCBSTX and Medicare spending for price and adjusting BCBSTX spending and utilization for age and gender, we computed coefficients of variation, standard deviations from the Texas means, and kernel density estimates for standard deviations from the mean to compare variation in BCBSTX and Medicare spending and inpatient utilization. Results: Average total spending was $849.07 (SD $92.20) per Medicare enrollee per month and $258.30 (SD $22.17) per BCBSTX member per month. Coefficients of variation for total spending are similar within payers, though slightly lower for BCBSTX (0.09) than for Medicare (0.11). Results indicated that variations across Texas in total spending and inpatient utilization are similar in BCBSTX and Medicare both in level and in direction, as the correlations between Medicare and commercial spending and inpatient utilization are positive after excluding the Hidalgo/McAllen regions. Over the state of Texas, regions of high Medicare spending tend to be also regions of high private insurance spending. McAllen is an outlier for Medicare spending, but not for BCBSTX spending. Conclusions: Much of the variation in Medicare per capita expenditure can be attributed to variation in utilization since Medicare prices are relatively fixed. For private payers, it is possible that the variation in prices and the variation in utilization offset each other. However, the findings from this study are important in comparing overall spending variations in Medicare and BCBSTX since, from a societal perspective, it is the total per capita spending that represents the economic burden and the potential need for interventional policies. More research is needed to identify which factors explain price and utilization variation in order to provide guidance for policies.