Massachusetts Total Medical Expenses: 2009 Regional Analyses

1. Massachusetts Total Medical Expenses:2009 Regional Analyses Steve McCabe Division of Health Care Finance and Policy June 29, 2011

2. What is Total Medical Expense (TME)? • Total medical expense (TME) represents the total health care expenditures for a member population expressed on a per member per month (PMPM) basis. • TME is based on payments for all categories of medical spending including member cost sharing. • TME includes non-claims related payments to providers such as quality incentive payments and capitation settlements. • TME incorporates health care service type, service volume, and service price, as it includes all payments for medical care made on behalf of members. •  TME can be measured on an unadjusted basis which reflects actual spending but does not consider health differences among member populations. TME may also be adjusted to reflect differences in member health status to better compare spending between different member groups. • TME data presented here represent fully and self-insured commercial claims from five large Massachusetts carriers accounting for about 66% of the privately insured market.

3. TME and health resource planning • Health resource planning involves ensuring that appropriate health resources are available to address the health care needs of differing regions, communities,and populations. • Total medical expense (TME) data may be a useful metric for comparing medical spending for members of different regional areas and over time understanding spending trends at regional and local levels. • Unadjusted TME in an area reflects actual total health care spending; the result of service type, utilization, and price for members who reside in that area. • Measuring health status adjusted medical spending at the local level may help identify geographic areas for further study to determine whether the available health resources are appropriate, inadequate, or in excess of the health care needs of the residents of those communities.

4. Massachusetts total medical spending by service category (2009) In 2009, Massachusetts statewide commercial TME was $403per member per month (PMPM).

5. Commercial unadjusted TME andrelative TME by region Medical spending varied by region relative to the statewide average, from $372 PMPM in central Massachusetts to $426 PMPM in the North Shore region. Merrimack Valley$390 (0.97) Central Massachusetts$372 (0.92) North Shore$426 (1.06) Greater Boston$406 (1.01) Western Massachusetts$381 (0.94) Southeastern Massachusetts$421 (1.04)

6. Understanding health status adjusted relative TME • In order to compare regional TME while accounting for differences in population, DHCFP used health status adjusted relative TME. • Regional health status adjusted TME was divided by the payer average health status adjusted TME to create payer-specific relativities. • Payer-specific relative TME was weighted based on payer membership in each region and combined to create a single aggregate health status adjusted relativity. • Health status adjusted relative TME reflects whether, given the payer mix and population of a region, medical spending is generally at, above, or below spending on a statewide level.

7. Health status adjusted relative TME by region When adjusted for member health status, the regional variation in TME is narrowed. Central Massachusetts, western Massachusetts, and Merrimack Valley remain lower TME areas. Southeastern Massachusetts reflects average level relative TME, while Greater Boston and the North Shore remain higher TME. Merrimack Valley0.97 Central Massachusetts0.97 North Shore1.03 Greater Boston1.02 Western Massachusetts0.99 Southeastern Massachusetts1.00

8. Comparison of unadjusted and health status adjusted relative TME by region • Low absolute medical spending in western and central Massachusetts appears to be influenced by healthier populations, although spending in those regions remains below average even after adjusting for health status. • Higher absolute spending in southeastern Massachusetts appears almost entirely the result of health status, as relative TME reflects average health status adjusted spending. • In the North Shore, TME remains highest although closer to average after adjusting for health status. • TME in the Greater Boston area remained slightly above average after adjusting for health status.

9. Commercial unadjusted TME by city and town This figure provides data for 335 of Massachusetts’ 351 cities and towns. Unadjusted city and town TME ranged from a low of $249 PMPM to a high of $676 PMPM. Merrimack Valley$390 (0.97) Central Massachusetts$372 (0.92) North Shore$426 (1.06) Greater Boston$406 (1.01) Western Massachusetts$381 (0.94) Southeastern Massachusetts$421 (1.04) $426 and above $403 - $425 $376 - $402 $375 and below No data available

10. Commercial health status adjusted TMEBlue Cross Blue Shield of Massachusetts Health status adjusted TME varied by 60% for Blue Cross Blue Shield of Massachusetts, from a low of $305 PMPM in Holyoke to $489 PMPM in Watertown. $426 and above $403 - $425 $376 - $402 $375 and below No data available

11. Commercial health status adjusted TMEHarvard Pilgrim Health Care Health status adjusted TME varied by 27% for Harvard Pilgrim Health Care, from a low of $353 PMPM in Lowell to $450 PMPM in Brookline. $426 and above $403 - $425 $376 - $402 $375 and below No data available

12. Commercial health status adjusted TMETufts Health Plan Health status adjusted TME varied by 28% for Tufts Health Plan,from a low of $337 PMPM in Lowell to $431 PMPM in Newton. $426 and above $403 - $425 $376 - $402 $375 and below No data available

13. Higher and lower health status adjusted TME by city across payers The cities listed are those where, across the largest payers, member health status adjusted TME was either at or above the payer’s average (higher TME) or; at or below the payer’s average (lower TME). Cities are included only if at least two of the largest three payers reported sufficient data. * Denotes city reported with TME above/below median for all three payers included in this analysis.

14. Higher and lower health status adjusted TME by city across payers There is no apparent regional trend between cities with higher or lower health status adjusted TME across payers. Median health status adjusted TME of the two groups varied by 8-13% across the three largest payers. Cities with higher health status adjusted TME Cities with lower health status adjusted TME

15. TME and income • Analysis of cities with higher and lower health status adjusted TME across payers indicated a significant difference in median income between these groups. • To examine this further, DHCFP performed regression analyses to determine whether city median income was correlated to health status adjusted TME and found a moderate correlation. • DHCFP explored this apparent relationship by comparing health status adjusted TME across the ten most and least affluent communities based on median city income. This analysis was conducted for Blue Cross Blue Shield as its larger membership allowed for inclusion of the greatest number of communities.

16. Blue Cross Blue Shield health status adjusted TME for highest and lowest median income cities and towns As groups, median health status adjusted total medical spending for the most and least affluent cities with at least 3,000 Blue Cross Blue Shield members was significantly different, at $456 PMPM and $382 PMPM, respectively. 15

17. BCBS TME by service for highest and lowest median income cities and towns Medical spending between the two groups differed for hospital inpatient services, with the least affluent communities experiencing higher spending. Higher income communities showed higher spending on other professional services. Non-claims Capitation 16

18. TME regional analysis: Key Findings • There are considerable differences in TME by geographic area, based on member residence. At the regional level, unadjusted TME ranged from $372 PMPM in central Massachusetts to $426 PMPM in the North Shore region, a variation of nearly 15%. At least some of this variation is due to differences in health status. • Health status adjusted TME varied significantly across cities and towns of members within a single carrier. Health status adjusted TME varied by as much as 60% for Blue Cross Blue Shield of Massachusetts (from a low of $305 in Holyoke to $489 in Watertown), 27% for Harvard Pilgrim Health Care (from a low of $353 in Lowell to $450 in Brookline), and 28% for Tufts Health Plan (from a low of $337 in Lowell to $431 in Newton). • Some cities and towns have lower or higher health status adjusted TME across payers. There in no clear regional pattern which might explain this. In some cases these towns abut one another, suggesting further analysis is needed to understand this variation. • Health status adjusted TME was higher in the most affluent communities and lower in the least affluent communities. This suggests further inquiry may be warranted to determine whether existing health resources are appropriate, inadequate, or in excess of health care needs.

19. For more information: www.mass.gov/dhcfp