Area health care prices are 17% above U.S. av­er­age

No rea­sons in re­port, but an­a­lysts have ideas

Milwaukee Journal Sentinel - - Front Page - Guy Boul­ton

Dif­fer­ent stud­ies over the years have shown that health care prices in the Mil­wau­kee area are higher than those in other mar­kets. The Health Care Cost In­sti­tute now has an es­ti­mate on just how much higher.

Its es­ti­mate: Mil­wau­kee’s prices are 17 per­cent above the na­tional av­er­age.

Health care prices in the Green Bay area are only slightly bet­ter. Prices in that mar­ket over­all are 14 per­cent above the na­tional av­er­age.

By com­par­i­son, prices over­all are 13 per­cent be­low the na­tional av­er­age in the Des Moines, Iowa, and Kansas City, Mis­souri, metro ar­eas. They are 10 per­cent lower in Cincin­nati. In St. Louis, they are 22 per­cent be­low the na­tional av­er­age.

Even prices in the Chicago metro area over­all are slightly be­low the na­tional av­er­age. And in the Ap­ple­ton area, they are 3 per­cent be­low the av­er­age.

The es­ti­mates are from the Healthy Mar­ket­place In­dex com­piled by the Health Care Cost In­sti­tute. The in­dex — con­sist­ing of in­ter­ac­tive maps — com­pares the av­er­age prices paid for the same set of health care ser­vices in 112 metro ar­eas across the coun­try.

It is based on 1.8 bil­lion med­i­cal claims for com­mer­cial health plans — those of­fered by em­ploy­ers or bought by in­di­vid­u­als and fam­i­lies — from Unit­edHealth­care, Hu­mana, Aetna and Kaiser Per­ma­nente from 2012 through 2016.

The es­ti­mates pull to­gether ear­lier re­ports on health care spend­ing and prices from the Health Care Cost In­sti­tute.

The es­ti­mates are an­other ex­am­ple of how health care prices vary through­out the coun­try — and how costs in the Mil­wau­kee area are higher

than in other metro ar­eas.

The re­port on which the in­ter­ac­tive maps are based did not set out to look at the rea­sons for the vari­a­tion in prices.

“It re­ally varies from place to place,” said Bill John­son, a se­nior re­searcher at the Health Care Cost In­sti­tute. “What this re­port is de­signed to do is try to help peo­ple get a bet­ter pic­ture of their lo­cal area.”

But most econ­o­mists and pol­icy an­a­lysts at­tribute the dif­fer­ence in prices to the lever­age that health sys­tems have when ne­go­ti­at­ing prices with health in­sur­ers.

“It doesn’t mat­ter what you do — they are go­ing to raise their prices to get their money,” said Glenn Mel­nick, a health econ­o­mist and pro­fes­sor at the Univer­sity of South­ern Cal­i­for­nia.

Prices typ­i­cally are higher in mar­kets that are dom­i­nated by one or two health sys­tems or in mar­kets where cer­tain health sys­tems must be in­cluded in net­works for health plans to ap­peal to em­ploy­ers.

And econ­o­mists in­creas­ingly con­tend that the prob­lem has in­ten­si­fied in re­cent years amid the wave of con­sol­i­da­tion among health sys­tems.

A 2015 study by the Na­tional Acad­emy of So­cial In­sur­ance found that mar­ket power — the abil­ity to raise and keep prices higher than they would be in a com­pet­i­tive mar­ket — was a se­ri­ous prob­lem in health care mar­kets across the coun­try.

“Many health sys­tems are get­ting very rich,” said Robert Beren­son, a physi­cian and fel­low at the Ur­ban In­sti­tute, who co-chaired the panel that did the study.

He also at­tributes the vari­a­tion in prices to the abil­ity of health sys­tems, par­tic­u­larly those with so­called must-have hospi­tals, to ne­go­ti­ate higher prices with health in­sur­ers.

The vari­a­tion in prices also has drawn at­ten­tion to “all-or-noth­ing” clauses that re­quire health plans to in­clude all of a health sys­tem’s hospi­tals in a net­work and that bar health plans from plac­ing the hospi­tals in a tier that re­quires higher cost-shar­ing.

Aurora Health Care, now part of Ad­vo­cate Aurora Health, has long had those clauses in its con­tracts.

The clauses have been out­lawed in Mas­sachusetts and are be­ing chal­lenged in court in Cal­i­for­nia.

Cul­ture and prac­tice pat­terns

Prices also can vary be­cause of cul­ture and prac­tice pat­terns, Mel­nick said.

Physi­cians and hospi­tals in some parts of the coun­try raise prices more slowly and make bet­ter use of health care dol­lars.

For ex­am­ple, In­ter­moun­tain Health Care, one of the coun­try’s most re­spected health sys­tems, dom­i­nates the Salt Lake City metro area. Yet prices in that mar­ket over­all were 12 per­cent be­low the na­tional av­er­age.

Cul­ture and prac­tice pat­terns also could ac­count for why over­all health care prices in the Ap­ple­ton area are be­low the na­tional av­er­age — and well be­low the prices in the Mil­wau­kee and Green Bay ar­eas.

But no one can say for sure, and, if noth­ing else, the Health Care Cost In­sti­tute’s re­ports in re­cent years have shown how lit­tle is known about health care prices. That’s be­cause prices ne­go­ti­ated by health sys­tems and health in­sur­ers typ­i­cally are con­fi­den­tial.

The Health Care Cost In­sti­tute’s data has lim­i­ta­tions. An­them, for ex­am­ple, has not shared its med­i­cal claims. And its re­ports have been chal­lenged by the Wis­con­sin Hos­pi­tal As­so­ci­a­tion and con­flicted with other stud­ies on health care costs in south­east­ern Wis­con­sin.

But a 2015 re­port from the fed­eral Gen­eral Ac­count­abil­ity Of­fice also found that Mil­wau­kee and Madi­son had higher prices. That study, which looked at 78 metro ar­eas, was based on med­i­cal claims for com­mer­cial in­sur­ers from 2009 and 2010.

John­son, the se­nior re­searcher, said the Health Care Cost In­sti­tute is con­fi­dent that it has the data to make ac­cu­rate state­ments on over­all av­er­age prices in the 112 mar­kets in­cluded in the Healthy Mar­ket­place In­dex.

The Health Care Cost In­sti­tute doesn’t dis­close prices for spe­cific hospi­tals and health in­sur­ers, but it does pro­vide in­for­ma­tion on prices for spe­cific episodes of care within a metro area and across the coun­try on its web­site.

The vari­a­tion and in­creases have raised the ques­tion in pol­icy cir­cles whether health care prices need to be reg­u­lated sim­i­lar to the way util­ity prices are reg­u­lated, with states set­ting an up­per limit on what hospi­tals, physi­cians and other health care providers can charge.

“At some point, we will get very se­ri­ous about rate set­ting,” Beren­son said. “I don’t see any al­ter­na­tive.”

For ex­am­ple, prices could be lim­ited to dou­ble what Medi­care pays for the same med­i­cal ser­vices. The lim­its ini­tially could al­low for gen­er­ous re­im­burse­ment and then be low­ered over time.

“The prices need to be re­strained,” Beren­son said. “But there is no po­lit­i­cal will to do any­thing about it at this point.”

That, though, could change over time. Beren­son can see some states, such as Cal­i­for­nia, Mas­sachusetts and New York, tak­ing the lead.

Mel­nick, who said he is not a fan of a gov­ern­ment-ad­min­is­tered sys­tem, also sees this hap­pen­ing.

“Un­for­tu­nately, I think that’s where we are headed,” he said. “The mar­ket is just not work­ing.”

Mel­nick is work­ing on a study on the price in­creases for vagi­nal de­liv­er­ies and new­born care. He found that prices in­creased 170 per­cent in the past 10 years.

The study is on hospi­tals in Cal­i­for­nia, but he ex­pects that the same pat­tern would be found through­out the coun­try.

“It’s a per­fect case study of why the mar­ket isn’t work­ing,” Mel­nick said.

Sim­i­lar in­for­ma­tion on the price in­crease isn’t avail­able for the Mil­wau­kee area.

But, draw­ing on med­i­cal claims paid be­tween July 1, 2014, and June 30, 2016, shows that the av­er­age cost of a vagi­nal de­liv­ery and new­born care in the Mil­wau­kee area is $17,026, with prices rang­ing from $14,605 to $19,346.

The na­tional av­er­age: $12,772.

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