The fact that health care costs vary depending on where you live is not new. Figuring out why — whether due to unnecessary care, poor health, or high prices in a particular area — has been harder to determine because it is often hard to study a large enough group of individuals who are paying for care in the same way across multiple geographies.
The Center for Studying Health System Change recently studied the claims of 218,000 autoworkers throughout 19 metropolitan areas. Since the individuals were union employees with essentially the same health benefits, the researchers could determine where differences in claims costs came from, eliminating benefit differences.
Not surprisingly, the study’s authors found that health spending varied based on geographical region, from a low of $4,500 in Buffalo, N.Y., to a high of $9,000 in Lake County, Ill.
Differences in service quantities (amount of services utilized) accounted for two-thirds of the overall spending variation, while differences in prices accounted for one-third, according to the study.
Related to quantity of services used:
- Difference in health status accounted for 37% of the variation: Workers and their families were in worse health in areas where spending tended to be higher.
- Differences in quantity of care received (excess) accounted for 18% of the variation: These differences were often unexplained and occurred when two communities which were rated as similar for health risks had different utilization rates. For example, Syracuse, N.Y. and Cleveland, Ohio, have similar risk scores, but individuals in Cleveland receive 25 percent more care.
- Age and sex accounted for 10% of the variation: Older workers and females tend to have higher health care costs.
Related to differences in prices:
- Prices (excess) accounted for 33% of the variation: The greatest variation occurred in hospital prices and wasn’t related to objective measures of quality. The price gap varies widely across communities from a low of 30% above Medicare in Syracuse, N.Y. and St. Louis, Mo., to two and a half times the Medicare price in Lake County, Ill.
- Providers’ cost of doing business accounted for 2% of the variation
The study also included spending information from the following metropolitan areas: Akron, Ohio; Cleveland; Detroit; Flint, Mich.; Grand Rapids, Mich.; Kokomo, Ind.; Lansing, Mich.; Monroe, Mich.; Rockford, Ill.; Saginaw, Mich.; Toledo, Ohio; Warren, Mich.; Wilmington, Del.; and Youngstown, Ohio.