Understanding the Costs of Health Care

New institute gives researchers unprecedented access to data on the privately insured

By Martin Gaynor, Ph.D.

Health care costs have long been a “black box” for hospitals, academic medical centers, insurance companies, and related businesses. Although researchers have been asking insurance companies for data for years, those requests were ad hoc, handled by various departments within the insurers, and there was no business model to coordinate the data collection.

Those same researchers have become increasingly frustrated by the lack of comparative data on the privately insured, which accounts for about two-thirds of Americans. Although data is available for Medicare beneficiaries, it’s impossible to make assumptions based on that information as those patients tend to be sicker and beyond their childbearing years.

The idea to form the Health Care Cost Institute really coalesced just a few months ago. I was working on a project with the Rand Corporation, looking at the impact of clinics housed in retail drugstores. We were using data from one very large, insurer, and that company was getting some really smart people to look at their data—in fact, some of the top minds in the world. It occurred to us that the information would be useful to the insurance companies themselves.

It was important to create an independent nonprofit that would operate with the utmost integrity and credibility. The Health Care Cost Institute will provide researchers with access to comprehensive data sets of commercial costs and utilization. This de-identified data will be provided by Aetna, Humana, Kaiser Permanente, and UnitedHealthcare, as well as some government data from Medicare Fee for Service and Medicare Advantage.

Totaling more than 5 billion medical claim records and representing more than $1 trillion of health care activity over the past decade, this information will be used to produce scorecards—descriptive statistics on health care utilization and costs. Researchers will look at the characteristics of institutions or organizations that are most successful on various measures, trying to get a sense of patterns. These patterns could help academic medical centers and others to create new metrics. This unprecedented access to data will provide us with ways to answer questions we can’t even anticipate.

We’ve put together a fantastic governing board made up of independent national physician leaders and academic researchers, including Alan Garber of Harvard and Elizabeth Nabel of Brigham and Women’s/Faulkner Hospitals. Harvey Fineberg, president of the Institute of Medicine, is serving as an external advisor. The board will craft and implement proper procedures to ensure the integrity of HCCI’s work. We are forming policy committees now, and plan to issue our initial scorecard in early 2012.

One of our biggest tasks will be getting the data constructed and set up so that it is useful to researchers. If approved by the board, we anticipate launching a few selected studies fairly soon. We are also evaluating our ongoing business model. HCCI has received funding from the insurance companies that are providing data, but we’re looking for other funding sources as well.

At its most basic, HCCI was formed because a better understanding of health spending can improve the quality of care and save money. If we generate information that makes a difference, then we will be a success.

–Martin Gaynor, Ph.D., is chairman of the Health Care Cost Institute. He is the E.J. Barone Professor of Economics and Health Policy at Carnegie Mellon  University, Heinz College. He has testified before Congress and the Medicare Payment Advisory Commission, and has worked with the Federal Trade Commission and the Department of Justice on health policy issues. He can be reached at mgaynor@cmu.edu.