CONTACTS: Kate Dwyer (RYAN) 202-226-7326, Carlene Orig (BARRETT) 414-286-8531
FOR IMMEDIATE RELEASE: August 23, 2004
Mayor Barrett, Rep. Ryan Spotlight GAO Findings On Higher Cost Of Health Care In Milwaukee
MILWAUKEE – At a news conference this morning at Milwaukee City Hall, Wisconsin's First District Congressman Paul Ryan and Milwaukee Mayor Tom Barrett revealed the findings of an interim report they had requested by the U.S. Government Accountability Office (GAO) on Milwaukee health care spending compared to other areas.
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's report confirms that health care spending and prices in Milwaukee are high relative to the averages for the other metropolitan statistical areas (MSAs) in the study. Specifically, GAO found that:
- Health care spending in Milwaukee, adjusted for cost and patient age and sex differences, was about 27 percent higher than the average across all of the MSAs in this analysis.
- Hospital inpatient prices, adjusted for cost, case mix, and severity differences, were 63 percent higher.
- Physician prices, adjusted for cost and service mix differences, were 33 percent higher.
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.
In an upcoming report, the GAO intends to complete its analysis of factors that contribute to regional variations in spending in the Federal Employees Health Benefits Program.