Study Shows Wide Variation in Medicaid Spending



A look at Washington state’s Medicaid program could provide some clues for how to control costs as states prepare for the massive 2014 expansion of Medicaid under the Affordable Care Act.

Washington has been able to provide widespread access to outpatient services and prescription drugs, while keeping down spending on inpatient care, according to an analysis published July 7 in the journal Health Affairs (DOI: 10.1377/hlthaff.2011.0106).

The per beneficiary cost for inpatient stays was about 35% below the national average in Washington state, while outpatient visits and prescriptions were each 15% above the national average, according to authors Todd P. Gilmer, Ph.D., and Richard G. Kronick, Ph.D., who were both at the University of California, San Diego, when the article was written. Dr. Kronick is now a deputy assistant secretary for health policy at the Department of Health and Human Services.

Dr. Gilmer and Dr. Kronick analyzed Medicaid claims data from 2001-2005 to see how the volume and the price of services affected the variation in spending across the states. They limited their analysis to claims for Medicaid-only, disabled beneficiaries receiving cash assistance.

"Several states are using their Medicaid resources in a way that’s helping to reduce the need for more expensive hospital care," Dr. Gilmer said in a statement. "This suggests that there is a great deal of room for innovation in Medicaid. By increasing access to primary care and experimenting with team-based delivery models and low-cost providers, states may be able to improve quality while reducing Medicaid spending."

For example, the Medicaid programs in Connecticut, Massachusetts, New Hampshire, and Vermont spent more than most on prescription costs and outpatient visits, but had a lower-than-average number of hospital days. The inpatient and outpatient spending offset each other, the researchers wrote, resulting in average overall spending that was just below the mean among all states.

The researchers also found that having a large primary care workforce was associated with reduced hospital stays for some chronic conditions such as diabetes, chronic obstructive pulmonary disease, and adult asthma. Paying more for outpatient visits was also linked to reduced hospital admissions, according to the study. Similarly, paying more for hospital stays was associated with more admissions.

The authors received funding from the Robert Wood Johnson Foundation’s Changes in Health Care Financing and Organization initiative.

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