New GAO Report Finds Health Costs Vary Widely in U.S.

In a deep dive into what’s driving health-care spending, a new report by the top Congressional watchdog unit again found wide differences in hospital costs for the same surgeries between geographic regions. Bottom line: You could be paying more for the same hospital procedure, nearly double, depending on where you live.

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Henry Waxman (D-Calif.), the former chair of the House Committee on Energy and Commerce from 2009 to 2011, before his retirement had asked the Government Accountability Office (GAO) to study the differences in payments charged to private insurers in U.S. metropolitan statistical areas (MSAs) for three inpatient procedures.

Using a large insurance claims database, the GAO examined 2009 and 2010 spending by metropolitan statistical areas (MSA) for coronary stent placement; laparoscopic appendectomy; and total hip replacement. To do its study, the GAO looked at spending on hospital inpatient, hospital outpatient, post-discharge, professional, and other services.

The GAO found costs varied widely not just between regions, but within areas that are just a car drive away.

The new GAO report comes as the federal government steps up its pressure on medical providers to cut costs and deliver a more uniform health safety net.

“MSAs in the highest-spending quintile” had average “spending that was 74% to 94% higher than MSAs in the lowest-spending quintile, depending on the procedure,” the GAO found.  What’s the big driver behind the differences in costs?

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Hospital charges for overnight stays—the GAO found more than 80% of the swing in spending between MSAs for these procedures was because of the cost of the initial hospital stay (for more information on your MSA, click here for the GAO report: “Private Health Insurance: Geographic Variation in Spending for Certain High-Cost Procedures Driven by Inpatient Prices.”)

Consumers facing the highest costs live in these MSAs: Salinas, California; Charleston, West Virginia; Madison, Wisconsin; Dallas-Fort Worth; and San Diego-Carlsbad-San Marcos, California.

Consumers facing the lowest costs live in these MSAs: Louisville-Jefferson County, Kentucky-Indiana; Birmingham-Hoover, Alabama; St. Louis, Missouri-Illinois; Fresno Calif.; and Youngstown-Warren-Boardman, Ohio.

The GAO also found that MSAs with higher spending on one procedure “generally had higher spending on the other two procedures.” For instance, the GAO says “Salinas, California, and Fort Wayne, Indiana, were among the highest-spending MSAs for all three procedures, while Hartford, Connecticut, and Youngstown, Ohio, were among the lowest-spending MSAs for all three procedures.”

The breakdown between the three procedures: Residents in the Salinas, California MSA spent the most for coronary stents at $60,375 and Birmingham-Hoover, Alabama spent the least, at $17,768.

Consumers in the Salinas, California MSA again faced the highest costs for hip replacements. Average hip replacement in this MSA cost $57,990, versus the least costly in Youngstown, Ohio, where hip replacements on average cost $19,164.

And for laparoscopic appendectomy, the Salinas area again ranked tops at an average $25,924 cost, but the Fresno, California MSA ranked last in average costs, at $7,096.

Curiously, the GAO found high-spending MSAs or low-spending MSAs were not concentrated in particular regions of the country.

For example, it says it found 11 MSAs in the highest spending quintile for at least two of the three procedures were in far flung states, such as Albany, New York; Fort Wayne, Indiana; Houston, Texas; Madison, Wisconsin; Milwaukee, Wisconsin; Nashville, Tennessee; Salinas, California; and San Diego, California.

It also found some states had MSAs ranked in both the highest- and lowest-spending quintiles for the same procedure.

For instance, “in California, Salinas and San Diego were both in the highest-spending quintile for laparoscopic appendectomy spending, whereas Fresno, Oxnard, Riverside, San Jose, and Santa Rosa were all in the lowest-spending quintile,” the GAO found. 

Similarly, the GAO found in New York, “Albany was in the highest-spending quintile for total hip replacement, whereas Rochester,” just a few hours’ drive away “was in the lowest-spending quintile.”

According to the GAO, health spending for these procedures varied across MSAs “after GAO adjusted for geographic differences in the cost of doing business and differences in enrollee demographics and health status.”

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