Study finds variation in Medicaid prices, volume

A new study in the July issue of Health Affairs shows significant variation in the volume of services and prices for Medicaid spending across states, and researchers suggest understanding those differences could help improve the quality and efficiency of care.

In the nation's mid-Atlantic region—identified as New Jersey, New York and Pennsylvania—a combination of high service volume and, to a lesser degree, high prices, led to the most-expensive regional care, while lower prices and volume in the South Central region of Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee and Texas produced the least-expensive care.

According to the study, per-beneficiary spending in the 10 highest-spending states was $1,650 above the national average, with 72% of that stemming from the greater number of services that patients received. Meanwhile, spending in the 10 lowest-spending states was $1,161 below the national average, with service use accounting for only $672, or about 58% of that amount.

The authors studied Medicaid cash assistance data from 2001 to 2005 for inpatient hospital services, outpatient services and prescription drugs. They also concluded that the supply of primary-care physicians in certain areas was associated with reduced rates of admission for diabetes, lung disease and adult asthma—suggesting that increased access to primary care could improve the management of chronic disease for Medicaid beneficiaries.

Washington was cited as an example of a state that decreased spending by reducing hospital care and expanding primary-care access. Acute spending in Washington was 18% below the national average and inpatient stays per beneficiary were 35% below the national average, the study found. At the same time, outpatient visits and the volume of filled prescriptions in Washington were both 15% above the national average.

Authors of the study concluded that the results should be useful to Medicaid program directors and managed-care organization administrators who know their respective programs but who don't understand how the price and volume of services in their states compare with other states.

“However, our data are limited in that we were unable to measure differences in clinical indicators, functional status, or health outcomes,” they wrote. “By providing state-specific data on price and volume, we encourage decisionmakers to strive to better understand why price and volume are different in one state than in another, and to make purposive decisions about whether the rates are right.”



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