Lower private health care costs could mean higher Medicare spending

When the cost of private health care services decreases, Medicare spending increases, according to new data recently published in Health Services Research.

Researchers at the Leonard D. Schaeffer Center for Health Policy and Economics examined data from more than 300 U.S. regions and explored Medicare spending on inpatient and outpatient care as well as prescription drugs for fee-for-service beneficiaries.

It turns out that what happens in private health care may not stay in private health care, John Romley, PhD, research assistant professor at the USC Price School of Public Policy and lead researcher of the study, stated in a press release. If a private health plan manages to negotiate lower prices with health care providers, they may make up the difference by providing additional health care to Medicare beneficiaries.

Findings showed that a 10% lower price for private health care correlated a 3% increase in Medicare spending per member each year, as well as a 4.3% increase in specialist visits.

The results suggest that physicians and hospitals could shift services to Medicare if they stand to make a greater profit, although further research is needed to confirm this, Romley said. The team will continue exploring how mergers among insurers affect private health care prices, Medicare utilization and spending.

For more information:

Romley JA. Health Serv Res. 2014; doi:10.1111/1475-6773.12262

Disclosure: Romley collaborated with the USC Schaeffer Center, Harvard University and Stanford University. Research funded by the USC Schaeffer Center, a collaboration between the USC Price School of Public Policy and the USC School of Pharmacy.

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