Some are saying that a new study from the Rand Corporation shows that Wisconsin’s commercial hospital prices are high, at 290% of Medicare payments. But the study, intended to provide information to businesses for purchasing decisions, is seriously flawed.
“One of our biggest concerns is the small sample size for Wisconsin,” said Eric Borgerding, WHA president & CEO. “Using data that aren’t truly representative of the full picture of health care in Wisconsin prevents us from drawing meaningful conclusions at best, more likely, it causes misleading conclusions.”
This isn’t the first time Rand has attempted to compare hospital prices across states. While the new study released on September 18 includes an increase in sample size compared to the previous version, it still represents just 3% of the total commercial allowed amounts for Wisconsin hospitals.
Looking at the report’s results for Michigan demonstrates how a small sample size could lead to questionable results. Compared to the previous study, the sample size for Michigan dropped considerably and, interestingly, the estimated prices in Michigan supposedly increased compared to Medicare by 22% in just one year. This shows that the study results are sensitive to the data input and should be viewed with skepticism.
WHA also believes the comparison to Medicare is problematic.
“There is a perception that Medicare rates are adequate and reflect a provider’s costs, and that’s just not accurate,” said WHA Senior Vice President of Public Policy Joanne Alig. “So, anytime you want to use Medicare as a benchmark, you have to understand how Medicare sets rates.”
Medicare geographic and wage index adjustments are widely known to be faulty, making comparisons across states questionable. Rates can be subject to the political whims of Congress. And finally, payments also get adjusted downward to help pay for programs outside of Medicare.
WHA has long advocated that quality and access are important components of value, and the Rand researchers acknowledge there is a link between quality and cost. Wisconsin’s quality was also highlighted in a
report last week from HC Trends, a research affiliate of BSGA, which indicated that Wisconsin is fortunate to have high-quality, accessible care while overall premiums are in line with the national average.