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More than two years ago, Ryan
and Barrett – who was serving in the U.S. House of Representatives at the time
– asked the GAO to investigate why Milwaukee pays more for health care than
comparable cities and markets elsewhere in the country.
They made this request after a consulting group (Mercer, Inc.) found
that, in the greater Milwaukee area, large employers’ health care costs are
about 55 percent greater than in the rest of the Midwest. In response to this request,
the GAO compared Milwaukee health care spending per enrollee, hospital inpatient
prices, and physician prices with similar metropolitan areas throughout the
country, analyzing 2001 claims data for enrollees under the age of 65 from the
largest national insurers participating in the Federal Employees Health Benefits
Program. The GAO also interviewed key stakeholders in Milwaukee to identify
factors they thought affected health care spending and prices – then examined
and evaluated these factors.
The GAO assessed factors identified by stakeholders – including representatives of health insurance companies, hospital networks, physician networks, and large employers – that stakeholders said contribute to Milwaukee’s higher spending and prices. The factors the GAO analyzed are provider leverage, Medicare payments, uncompensated care and population characteristics. In its interim report, GAO concludes that provider leverage relative to insurers may contribute to high prices, whereas the other factors examined do not appear to explain the discrepancy in prices between Milwaukee and other areas. “When we learned that our
area was paying more for health care than other parts of the country, we had to
find out why,” Ryan said “This
GAO report gives us key information we need about why we pay so much more for
our health care – namely, the highly consolidated provider networks and the
leverage they have over those who pay the bills.
Soaring health care costs are hurting individuals and businesses in our
area, and they hurt Wisconsin’s economic competitiveness too.
This report is a good starting point for an honest dialogue about the
best ways to lower costs and strengthen the hand of consumers in our region,”
Ryan said. “The findings in the GAO
report are troubling,” Mayor Barrett said. “It reveals high spending and
prices were caused in part by the leverage exerted by provider networks in
Milwaukee, which limited insurers’ ability to control the prices they pay.
This must change. We need to work together and find ways to make health care
more accessible for everyone,” Barrett stated. In the report, the GAO noted:
“We found some evidence to support the stakeholders’ assertion that
hospitals and physicians had more leverage than insurers in negotiating prices.
The two largest hospital networks in Milwaukee had 14 percent more market
share, that is, share of beds, than the average across MSAs of similar size.
The larger the share of the hospital service market controlled by a few
providers, the greater the likelihood that insurers will have to contract with
those providers to ensure enrollee access to care.” With regard to Medicare
payments, GAO found that Milwaukee hospitals actually received Medicare payments
above the median for a high-volume type of inpatient stay and that one
hospital’s payment was higher than 90 percent of all hospitals in the country. |
