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McAllen versus El Paso, Part II

By Geoffrey Holman

In June 2009, writer and surgeon Atul Gawande, M.D., shocked the nation when he exposed the enormous difference in Medicare spending between McAllen and El Paso, Texas, two otherwise similar towns. Using data from the Dartmouth Atlas of Health Care, Gawande reported that Medicare spent about $15,000 per beneficiary in McAllen in 2006—nearly twice as much per beneficiary as in El Paso. But though Gawande's New Yorker article may have answered a number of tough questions about the reasons for that discrepancy, for Dartmouth health economist Jonathan Skinner, Ph.D., it left one very important question unanswered: Did spending patterns seen in the Medicare population exist for people under 65?

To find out, Skinner teamed up with two University of Texas professors to analyze data from Blue Cross and Blue Shield (BCBS) of Texas, the largest private insurer of under-65 individuals in the state.

Skinner teamed up with two University of Texas professors.

Patterns: "Surprisingly, and in contrast to the Medicare data," wrote the researchers in Health Affairs, "total spending per BCBS member was actually slightly lower in McAllen than in El Paso." That conclusion raised another question: how to explain the difference in spending patterns for Medicare and non-Medicare patients.

One possibility, Skinner says, is that "physicians responded differently depending on the insurance company that was reimbursing them." Gawande argued that one reason for high Medicare spending in McAllen was that providers there had created a "culture of money," something Skinner says is consistent with his findings. McAllen doctors increase their "use of profitable Medicare services when there is diagnostic and procedural discretion and clinical latitude," Skinner and his coauthors noted, meaning that physicians there tend to take an aggressive approach to treatment whenever the best course of action is a judgment call. Medicare patients are by definition older than BCBS patients and so typically would need more tests and procedures, but whether such things are always necessary remains up for debate.

Another reason for high Medicare spending in McAllen may be Medicare's lack of utilization review, a process that private insurance companies—such as BCBS—use to determine whether procedures are truly necessary. Without utilization review, unnecessary tests and procedures could be ordered without repercussions, increasing physician and hospital revenues and adding unnecessarily to Medicare spending. But, given the much lower health-care costs for Medicare beneficiaries in El Paso, utilization review, or the lack thereof, cannot be the only cause of the high cost of care in McAllen.

Puzzle: As with Gawande's article, Skinner's new study answers some important questions but also brings to light a number of new ones that will surely fuel the continuing effort to piece together the puzzle of variations in health-care delivery.

If you'd like to offer feedback about this article, we'd welcome getting your comments at DartMed@Dartmouth.edu.

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