Sources of Geographic Variation in Health Care Spending Among Individuals With Employer Sponsored Insurance

Area of Science:

• Health Economics
• Healthcare Policy
• Medical Economics

Background:

• Geographic variation in healthcare spending is a persistent issue in the United States.
• Understanding the drivers of this variation is crucial for cost containment and equitable care.
• Previous studies have struggled to disentangle demand-side from supply-side influences.

Purpose of the Study:

• To quantify the proportion of healthcare spending variation attributable to place-specific (supply) versus person-specific (demand) factors.
• To analyze the impact of patient migration on individual healthcare spending.
• To identify the roles of price and utilization in place-based spending differences.

Main Methods:

• Utilized health care claims data from the Health Care Cost Institute (HCCI).
• Analyzed patient migration patterns across 112 metropolitan statistical areas (MSAs) from 2012 to 2016.
• Employed an event study approach to assess the impact of relocation on medical spending.

Main Results:

• A 10% increase in area spending corresponded to a 4.2% rise in individual medical spending.
• Approximately 42% of healthcare spending variation among the commercially insured is linked to place-specific factors.
• Both healthcare prices and utilization patterns significantly contribute to geographic spending disparities, with price increases driving 5% and utilization increases driving 3.6% in spending.

Conclusions:

• Place-specific factors, encompassing both price and utilization, are substantial drivers of geographic variation in healthcare spending.
• Policy interventions aimed at reducing healthcare costs should consider regional variations in supply-side factors.
• Individual healthcare spending is demonstrably influenced by the healthcare market characteristics of their location.