Stanford Health Economics Seminar

Date: October 6, 2015
Time: 12:00 noon - 1:30 pm
Location: Room 101, Lou Henry Hoover Building
580 Serra Mall, Stanford
Speakers: Zach Cooper
Assistant Professor of Public Health (Health Policy) and Economics, Yale University
Title: Why is Health Spending on the Privately Insured in Grand Junction, CO so High? Prices, Market Concentration, and Health Spending?

We use newly released insurance claims data for 88 million individuals with employer-sponsored insurance between 2007 and 2011 to examine variation in health spending and in hospitalsí negotiated transaction prices across the US for the privately insured. We examine how providersí negotiated transaction prices vary within and across markets and analyze the factors associated with that variation. Likewise, we examine how variation in providersí prices influences the variation in health spending on the privately insured. Four key findings emerge. First, at the level of the Hospital Referral Region (there are 306 HRRs in the US), the correlation between total Medicare spending per beneficiary and spending per privately insured beneficiary is only 0.14. Second, whereas variation in the quantity of care provided across HRRs is the primary driver of spending variation for Medicare, variation in the price of care across HRRs is the primary driver of spending variation for the privately insured. These two facts imply that extrapolating lessons on health spending from Medicare to the privately insured must be done with caution. Third, hospital prices for the privately insured often vary by a factor of 10 or more across HRRs and a factor of five within HRRs. Fourth, hospital transaction prices are strongly associated with indicators of hospital market power.