To measure the contribution of market‐level prices, utilization, and health risk to medical spending variation among the Blue Cross Blue Shield of Texas () privately insured population and the exas Medicare population.
Claims data for all members and publicly available data for exas in 2011.
We used observational data and decomposed overall and service‐specific spending into health status and health status adjusted utilization and input prices and input prices adjusted for the and Medicare populations.
Variation in overall spending across s appeared driven by price variation, whereas utilization variation factored more prominently in Medicare. The contribution of price to spending variation differed by service category. Price drove inpatient spending variation, while utilization drove outpatient and professional spending variation in . The context in which negotiations occur may help explain the patterns across services.
The conventional wisdom that Medicare does a better job of controlling prices and private plans do a better job of controlling volume is an oversimplification. does a good job of controlling outpatient and professional prices, but not at controlling inpatient prices. Strategies to manage the variation in spending may need to differ substantially depending on the service and payer.