Study: Private insurance plans better at controlling costs

Private insurance plans might be better at controlling healthcare costs than Medicare, according to a Health Affairs study released Tuesday morning.

The study followed up on an influential 2009 New Yorker article that found Medicare spending on the elderly population is significantly higher in McAllen, Texas, than it is in El Paso, Texas. Using medical and expense data for patients in those towns who are privately insured by Blue Cross and Blue Shield, researchers found private insurers were cheaper and had a more consistent cost structure.

Researchers said their findings were consistent with the New Yorker article that found doctors were increasing the use of profitable Medicare services when they were not being closely monitored. However, private insurance plans, because of their more stringent reviews for the use of medical services, might be better at containing costs, researchers said.

According to the study, Medicare spent almost double in McAllen ($14,817 per patient) than what it spent on an average El Paso beneficiary ($7,947 per patient). Both figures, however, far surpassed private insurance costs: Blue Cross spent $2,266 on the average McAllen enrollee, while spending $2,428 on the average El Paso enrollee.

Researchers said home healthcare accounted for the greatest variability in Medicare spending between the two regions, with McAllen using the service 4.6 times more than in El Paso. Researchers found even more variations in services, including double the rate of cardiac surgery in McAllen. However, those sharp variations in the use of Medicare services were not found in the private insurance population under the age of 65.

Ultimately, the variation in services might be explained by private insurance companies and Medicare exhibiting “very different interactions” with local providers, researchers said.