back September 14, 2005 Mayor Barrett and Congressman Ryan Release GAO Report on Health Care Prices and Spending MILWAUKEE/WASHINGTON – Wisconsin’s First District Congressman Paul Ryan and Milwaukee Mayor Tom Barrett today released a report they had requested by the U.S. Government Accountability Office (GAO) on geographic differences in health care prices and spending and what factors are behind these differences.  More than three 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.  In response to this request, the GAO compared hospital prices, physician prices, and health care spending per enrollee across metropolitan areas nationwide using 2001 medical claims data from enrollees under age 65 in selected national preferred provider organizations (PPOs) participating in the Federal Employees Health Benefits Program (FEHBP). In August 2004, the GAO issued an interim report focused on Milwaukee health care prices and spending compared to other areas and concluded that provider leverage relative to insurers may contribute to high prices.  The GAO’s final report, released today, looks more broadly at the variation in hospital and physician prices and spending in metropolitan areas throughout the United States. As part of its analysis, GAO ranks 232 areas around the nation by hospital prices and 319 areas by physician prices. This report confirms that health care prices in the Milwaukee area and other Wisconsin communities are high relative to the other metropolitan statistical areas (MSAs) in the study. Specifically, GAO found that: Hospital prices varied more than physician prices nationwide. The Milwaukee-Waukesha area ranked fifth highest by adjusted hospital prices, with hospital prices about 57% above the national average. The La Crosse, Wisconsin-Minnesota area ranked tenth highest by hospital price, with prices nearly 39% above the national average. Metropolitan areas in Wisconsin had physician prices ranked among the highest in the study: of the 10 metropolitan areas with the highest physician prices, eight were located in Wisconsin. The GAO found physician prices were highest in the La Crosse WI-MN area, with prices 48% above the national average. A chart listing the top ten GAO-ranked areas by physician price appears below. In addition, Sheboygan ranked 11th, Milwaukee-Waukesha ranked 16th, and Kenosha ranked 18th highest by physician price.  On average, PPOs paid higher hospital and physician prices in metropolitan areas in the Midwest and lower prices in the Northeast.  The GAO assessed factors that could contribute to the geographic differences in hospital and physician prices, concluding that areas where there was less competition among hospitals and less HMO capitation (indicative of less price-bargaining leverage) had higher prices, on average. Overall, the GAO found that many metropolitan areas in its study had low levels of competition, and the least competitive areas also tended to have smaller populations.  The GAO found no evidence of cost shifting. In other words, PPOs did not pay higher prices in areas with a higher percentage of Medicaid or Medicare beneficiaries, a larger uninsured population, or lower Medicaid payments. In fact, physician prices were lower, on average, in metropolitan areas with lower adjusted Medicaid payment rates and proportionately larger uninsured populations. “The results of this study are startling. This GAO report illustrates a very clear point: less competition means higher prices for consumers. And Wisconsinites are paying a lot more for health care because consumers lack power and providers face little competition,” Ryan said. “This shows how great the need is for more competitive, consumer-based health care, where patients have the information and the bargaining power they need to be choosy consumers and get quality care while lowering their costs. I plan on examining this issue in greater detail through a committee field hearing in Wisconsin.” “The results of the GAO report confirm to me the reasons I asked for this report. The Milwaukee region ranked fifth highest nationally for hospital costs among 232 areas studied. That is unacceptable and we must find a way to control these skyrocketing costs and their impact on job creation. Employers in our region should study this report and consider solutions to increase competition and gain more bargaining power. I look forward to participating in Rep. Ryan’s public hearings and working on solutions,” said Mayor Tom Barrett. The GAO Report is available on Congressman Ryan’s website at www.house.gov/ryan or via the GAO’s website at www.gao.gov. Below is a chart adapted from Table 16 (Appendix III) of the GAO Report, listing the ten most expensive areas by adjusted physician prices. Rank  Metropolitan Area Percent prices were above the average 1  La Crosse, WI-MN           48% 2 Wausau, WI           46% 3 Eau Claire, WI           42% 4 Madison, WI           41% 5 Jonesboro, AR           35% 6 Janesville-Beloit, WI           32% 7 Great Falls, MT           29% 8 Green Bay, WI           28% 9 Appleton-Oshkosh-Neenah, WI           27% 10 Racine, WI           24% Print Contacts: Kate Matus (RYAN) 202-226-7326 Paul Vornholt (BARRETT) 414-286-2200