Role of Prices, Utilization, and Health in Explaining Texas Medicaid Newborn Care Spending Variation

Newborn care is one of the most frequent types of hospitalization and Medicaid covers over 50% of all births nationwide. However, little is known about regional variation in Medicaid newborn care spending and its drivers.

To measure the contribution of market-level prices, utilization, and health risk on regional variation in spending among newborn Medicaid population in Texas.

The study used 2014 Texas Medicaid newborn claims and encounters linked to birth and death certificate data. Newborn care spending was defined as Medicaid payments per newborn hospital stay, including hospital transfers, from birth through discharge home or death. Spending was further categorized into inpatient facility and related professional spending. Variation in spending across neonatal intensive care regions was decomposed into price and utilization, accounting for input price and health risk differences.

Newborn care spending across Texas regions varied significantly (coefficient of variation, 0.31), with most of the variation attributed to spending on inpatient facility services (91%). Both price (41%) and utilization (27%) played a role in explaining this variation, after adjusting for health status (29%) and input price (4%). Though most regions with the highest spending indexes had high price and utilization indexes, some had high spending driven mostly by high prices and others by high utilization.

Significant regional variations in price, utilization, and health status exist in Medicaid newborn care across Texas in 2014. Disentangling the effect of each driver is important to address spending variation and improve efficiency in newborn care.