Data scan

As Congress grapples with a tight deadline to curb healthcare-fueled deficits, a group of prominent economists and health policy experts last week launched an effort to more closely examine a larger, less transparent segment of the industry's costs: the privately insured.

Four private health insurers said last week that policy experts would soon gain access to a decade of data on the price and use of medical care across the country. The insurers said they'd contribute more than 5 billion medical claims, reaching back to 2000, offering data that was previously available only by request or from companies that sell some information.

Information on what propels U.S. health spending has been limited largely to publicly available Medicare data, said economists and insurance executives behind the new organization. Medicare studies, though important, do not capture spending trends for the majority of the U.S. population, they said. And Medicare prices, unlike the commercial market, are governed by federal rates.

Research so far into spending growth has suggested several possible culprits: Hospitals or health plans with market clout to raise prices. Doctors who care for patients based on local custom, which varies dramatically across the country. A poorly organized and fragmented health system with financial incentives that goad hospitals and doctors to do more to earn more.

The studies have been fodder for disputes about who's at fault while failing to provide satisfying answers. And as the economy drags and pressure builds to slow health spending and curb the nation's deficit, the research has polarized sectors of the healthcare industry.

The Health Care Cost Institute, a not-for-profit launched last week in Washington, will oversee the data submitted from Aetna, Humana, Kaiser Permanente and UnitedHealthcare and publish trend reports twice a year.

“We're missing a huge amount of the story” without data on the nation's privately insured patients, said Dr. Alan Garber, a Harvard University health policy professor who is an institute board member, “and the story is different” from Medicare spending. Garber is also vice chairman of the Institute of Medicine's committee to study geographic variation in healthcare spending.

Insurance officials and academics behind the institute said the new trove of data could help unearth more information about what fuels healthcare costs, without the taint of industry-generated studies or politics.

“How can we possibly know enough” about such a fast-growing and sizable industry, asked Jonathan Gruber, an economist and professor at the Massachusetts Institute of Technology and a member of the institute's governing board.

For an example of how Medicare spending alone may not capture enough information, Gruber, an economist at the Massachusetts Institute of Technology, pointed to McAllen, Texas, a town profiled in the New Yorker magazine in 2009 for its high Medicare spending.

Atul Gawande, a surgeon and author, traveled to McAllen for an answer to why the Medicare spending per enrollee there came close to twice the national average and, perhaps, some answers for the nation's rising medical costs, he wrote.

His conclusion: “Physicians in places like McAllen behave differently from others,” Gawande wrote. “The $2.4 trillion question is why. Unless we figure it out, health reform will fail.”

But another look at McAllen in 2010 with privately insured patients produced different results. Two Texas researchers and Jonathan Skinner of the Dartmouth Institute for Health Policy and Clinical Practice found spending per privately insured McAllen patient was 7% below that of El Paso compared with 68% higher annual spending per McAllen Medicare enrollee.

“I think that's the one example we need,” Gruber said, referring to the differing McAllen figures for Medicare and privately insured patients.

Research by Michael Chernew, an economist at Harvard Medical School who is not involved with the institute, suggested hospital market clout raises prices for privately insured patients.

As in prior studies, research by Chernew and colleagues found Medicare spending varied across the U.S. So did private health plan spending—but not in the same markets as Medicare, they reported in February 2010. McAllen, Texas, ranked as one of the five most expensive cities for Medicare, placed at 270 among most-expensive commercial markets, the study found.

Notably, results did not suggest the same discrepancy between how often commercial and Medicare patients went to the hospital. In markets where Medicare patients made frequent hospital visits, higher numbers of privately insured patients did also, and vice versa.

Similar use of hospitals regardless of insurer pointed to price as the reason for spending differences between Medicare and private insurers, the research suggested. One possible reason for widely different commercial prices, the report continued, is market competition. Chernew and his colleagues found small, less competitive markets had the highest private-insurance spending.

Chernew said in an interview he could not know whether the institute's data would prove valuable to his research without more details about the database. Nonetheless, “More data is better than less data,” Chernew said. He also praised the researchers behind the institute. “More research is better than less research.”

Health policy experts seeking private plan data typically ask insurers directly or pay for access to proprietary databases. As a result, research can either be costly to undertake or limited to data from a single insurer.

“It's available, for a price,” said Chernew, who paid for access to medical claims for large employers from Thomson Reuters for his research comparing commercial and Medicare spending across 306 U.S. markets.

Thomson Reuters' databases contain medical bills for 140 million individuals from large and midsized employers, public agencies and insurers, the company's senior vice president for healthcare research services, Bill Marder, said in a written statement. “We are exploring ways to collaborate with the new HCCI and support its objectives,” Marder said.

The new institute will offer researchers data on prices and treatment provided at roughly 5,000 hospitals and by 1 million healthcare providers. Martin Gaynor, its chairman and a healthcare economist at Carnegie Mellon University, said he hoped to release data for free or at a nominal charge to make the new data widely available to researchers.

Insurers donating the data also provided seed money to the effort and Gaynor said the not-for-profit will seek grants. He stressed the insurers' role in the institute's operations and policies would be limited to data privacy and security.

Researchers won't be able to identify patients, doctors or hospitals from data under privacy safeguards to be established by the institute's Data Integrity Committee. Studies will be able to analyze prices and utilization across the country by medical conditions and compare hospitals that have been stripped of identifying information.

There may be some exceptions, but such restrictions won't be known until the institute finishes compiling the data and establishes its legal privacy protections, Gaynor said.

Despite the number of medical claims, the $1 trillion in spending captured by the promised database accounts for roughly 15.5% of private health insurance spending from 2000 through last year, based on CMS estimates and projections.

That may limit research on less common conditions or more sparsely populated communities, where to protect patient privacy, some data may be withheld, Gaynor said.

Board members said last week that they hoped to see more insurers join the effort. Missing from the list of major insurers to contribute data were Blue Cross and Blue Shield health plans. A Blue Cross and Blue Shield Association spokeswoman said no one was available to comment on the institute.

A lack of price transparency in commercial health plans and price disputes between providers and insurers in recent years have pushed more private insurance data into the public realm.

Fair Health, the not-for-profit consumer information and research organization to emerge from the settlement between UnitedHealthcare's data company and New York's attorney general, is expected to launch a research program in 2012, said Robin Gelburd, the organization's president.

“There is an insatiable hunger for good, reliable, transparent data,” Gelburd said on the announcement of the creation of the Health Care Cost Institute. “There can never be enough in terms of data made available to policymakers,” she said.

Fair Health and New York research universities oversee data disclosed by a dozen health insurers under a settlement with the New York attorney general's office, which alleged that Ingenix, a subsidiary of UnitedHealthcare, pushed out-of-pocket costs higher with flawed data. The American Medical Association reached a separate $350 million settlement with the company after bringing a class-action lawsuit against Ingenix for its pricing data. Harvard's Chernew is a member of Fair Health's scientific advisory board.

Gelburd said Fair Health now licenses its data to health plans, large self-insured employers, states, providers and consultants looking for independent data on out-of-pocket charges, more commonly known as the sticker price before insurance discounts. Consumers may also use Fair Health data to gauge prices.

UnitedHealthcare and Aetna, two insurers also contributing data to the Health Care Cost Institute, submit claims to Fair Health, which includes 10 billion claims from across the nation, Gelburd said. Data from the two organizations, however, differ. Fair Health to date compiles figures on the sticker price; the Health Care Cost Institute will disclose prices paid after insurers negotiate for discounts. “We welcome their entry” to the market for claims data, she said.

The Health Care Cost Institute will appoint a scientific committee to review and approve proposed research projects, which began to arrive as news of the not-for-profit spread, Gaynor said.

One proposal already received by Humana would compare the institute's hospital price data with reported hospital costs to analyze the relationship between the two, said Roy Goldman, vice president and chief actuary for Humana.

Goldman said insurers found administrative expenses the subject of intense public scrutiny during the health reform debate, which he said reflected a lack of understanding by policymakers and regulators about what drives premium increases. “They're a very small piece of the premium,” he said, underscoring the need for independent, third-party analysis of privately insured data, he said.

In La Crosse, Wis., Gundersen Lutheran Medical Center executives contend limited private-market research on health spending to date has unfairly branded the 261-bed hospital. The city was named one of the nation's highest-price hospital markets for privately insured federal workers by a 2005 Government Accountability Office study.

Michael Richards, Gundersen Lutheran's executive director of government relations and external affairs, said the small number of privately insured federal employees in the market skewed prices upward. Executives dismissed the report as flawed. “That's where we left it,” he said.

He said the Health Care Cost Institute could produce greater transparency on private-market prices, though he questioned whether La Crosse would be well-represented among participating insurers. Gundersen Lutheran's own insurance company holds a significant share of the local market, and he said it's too early to say if the hospital would submit its claims to the new database.

Nonetheless, he said more analysis of private-market health plans was needed, particularly of spending by commercial health plans in markets with historically low Medicare reimbursement, where cost-shifting may raise private insurance rates, such as Minnesota and Wisconsin.

Gundersen Lutheran, Richards said, would welcome more research that would slow health spending. “We're optimistic,” he said. “We have nothing to hide here.”