Insight, analysis & opinion from Joe Paduda

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Nov
3

Geographic variation in medical treatment and costs in Texas

The wide geographic variation in treatment has received extensive coverage in the Medicare and group health arenas, with one of the most-cited studies coming from the Dartmouth Medical School. The Dartmouth Atlas of Health Care uses Medicare data to illustrate the difference in frequency and utilization across states and MSAs, and is required reading for anyone pursuing this subject.
One of the questions raised by the Atlas is “does this variation also occur in other lines of coverage?” While there is not nearly as much data available on this subject, two fairly recent studies in Texas indicate that disparities in cost are not limited to the Medicare world.
The Research and Oversight Council’s (ROC) Analysis of the Cost and Quality of Medical Care in the Texas Workers’ Compensation System provides an excellent (and brief) summary of the two studies, one by the Council itself and the other by the well-respect Workers Compensation Research Institute (WCRI). Of note, the ROC’s study indicates that the average annual medical cost per claim range from $4242 in the Dallas/Fort Worth area to $2835 in San Antonio/Austin.
Undoubtedly this variation exists in other states as well. This raises some interesting issues, including:
–In states with regulated rates, do underwriters select risks based on lower-cost medical areas? If not, why not?
–Can payers focus their managed care efforts on high cost areas and away from low cost areas, and if not, why not?
–What is going on? Are treatment patterns different? Are costs higher? Are injuries or illnesses different? Is there a different mix of providers?
Clearly, medical care is delivered in different amounts, by different types of providers, via different procedures, in different areas. That being the case, why are managed care programs so generic? And could that be one of the reasons why they are both frustrating to the provider and ineffective at moderating health care cost increases?


Joe Paduda is the principal of Health Strategy Associates

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