As Private Health Care Prices Go Down, Medicare Spending Goes Up

Study finds doctors shift health care services to Medicare when they can profit from doing so.

Spending on Medicare increases as the price of private health care declines, according to a recent study.

The study, published online in Health Services Research on November 27, 2014, suggests the possibility that physicians and hospitals shift certain services to Medicare if they stand to make a profit.

"It turns out that what happens in private health care may not stay in private health care," said lead researcher John Romley in a press release. "If a private health plan manages to negotiate lower prices with health care providers, they may make up the difference by providing additional health care to Medicare beneficiaries."

The researchers evaluated data from more than 300 geographic regions across the United States to examine spending on inpatient and outpatient care and prescription drugs for fee-for-service beneficiaries through Medicare.

A 10% lower private price for health care was found to be associated with a 3% increase in Medicare spending annually per member, in addition to 4.3% more specialist visits. The cause of this trend still needs to be evaluated, the study noted.

The researchers are planning a future study to analyze how insurer mergers can impact the price of private health care and Medicare utilization and spending.

"We've known for a long time that some parts of the US have much higher Medicare spending than others, but not necessarily a higher quality of care,” Romley said. “But Medicare is only 20% of US health care spending, and we're only now beginning to understand how private health care differs throughout the US."