A new Network for Regional Healthcare Improvement (NRHI) report that reviewed healthcare costs for five states found huge differences concerning costs and drivers.
The NRHI analyzed data from Colorado, Maryland, Minnesota, Oregon and Utah.
Comparing 2015 risk-adjusted spending for private payers across those states, the researchers found that Colorado had the highest overall healthcare costs, while Maryland had the lowest costs.
The NRHI found that: pricing structures and care delivery patterns varied by state; year-over-year results were consistent within the states; each region's results provided a framework to consider how policies, demographics and market factors are affecting healthcare costs; and the results varied in all categories except for pharmacy pricing. The consistency among pharmacy pricing is related to “the influence of a few, large pharmacy benefit managers and pharmaceutical manufacturers’ national pricing policies," according to the report.
To show the wide difference in costs, Colorado’s total outpatient costs were 30% higher than the midpoint of the five states and pharmacy was 24% higher. Maryland’s total costs, meanwhile, were below the midpoint costs in all categories except for pharmacy. That could be in part due to the state's all-payer model, which sets across-the-board prices for hospital services.
For Oregon, which was at the midpoint for overall healthcare costs, pharmacy and outpatient costs were below average, but professional costs were higher than the midpoint.
The NRHI said bringing the higher than average cost states (Colorado and Minnesota) down to the average could potentially save more than $1 billion. The researchers added that the healthcare industry needs to address both price and utilization to make healthcare more affordable.
There’s not a one-size-fits-all approach to reducing costs either. For instance, one region may have higher utilization. In that case, engaging physicians to consider their referral patterns or use of tests and procedures could be a way to reduce costs.
However, if the costs are driven by high prices, purchasers or policymakers will need to become part of strategies to bring down costs.
“Understanding these differences can enable local stakeholders to act strategically and effectively. It’s not enough to know costs are high. This information enables us to do something about it,” the report states.
The wide variations of costs show that efforts to reduce healthcare costs need to allow for local flexibility. The report could provide fodder for President Donald Trump, the HHS and the CMS in providing states more ability to revamp public programs like Medicaid to create a program that works for that state. In recent months, the Trump administration has approved Medicaid waivers for states, including work requirements and ending retroactive coverage.
At least 10 states are seeking similar Medicaid waivers. Avalere recently suggested that the waivers may actually cause Republican-leading states to expand Medicaid, since the waivers will allow the states to reduce costs in other parts of the program. In regard to the work requirement, Avalere said Republican-led states may find a balance between insuring more people while increasing the number of employed.
Those lower costs are achieved, however, because fewer people are insured. This can lead to higher overall costs as people put off or avoid care entirely.