Health Care Costs in McAllen, TX

There have been several articles recently on the scandal of Medicare costs in McAllen, TX. The Medicare reimbursement rate is twice as high as in El Paso, another border town 800 miles northwest. A perfect example is the long and completely bogus article by Atul Gawande on the subject published in the New Yorker:

McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami–which has much higher labor and living costs–spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.

The author speculates about obesity, alcoholism, poverty, Tex-Mex food, and diabetes, but those rates are comparable to comparable towns. The high costs persist:

McAllen costs Medicare seven thousand dollars more per person each year than does the average city in America. But not, so far as one can tell, because it’s delivering better health care.

Later he considers malpractice, but shoots that down because state laws in Texas make lawsuits difficult and expensive for plaintiffs. The rest of the article is speculation and anecdotes about overly aggressive care and unnecessary testing, with no data to back it up. NY Times repeats the case without question, as does The Dallas Morning News, Huffington Post, and EconLog. They all miss the point, by a mile.

The answer of course is obvious if you look at a map:McAllen.gif

All the retired American expatriates living in Mexico, and there are hundreds of thousands of them, descend on McAllen for their Medicare treatments. If the procedures are too complicated and expensive to pay for out of pocket in Mexico, they drive to the closest town they can find in the good old U.S.A. That town is McAllen, TX.

The article claims that McAllen spends $15,000 per person across their Medicare enrollees in the McAllen area. I would bet that half or more is spent on people who don’t live or enroll in Medicare in McAllen. Their costs are lumped in with those who live in McAllen, even though they live in Mexico and enroll in Medicare in their former home towns in other states.

Keep the McAllen experience in mind when you hear people making claims about Local Medical Communities and how terrible overuse of medical care is, or how doctors practice predatory medicine, or hospitals and health insurers are motivated by greed and high profit margins. The Obama administration is counting on solving the health care spending by forcing all Local Medical Communities to have the same $/person as Rochester, MN. I hope whoever they assign to study the issue understands the expatriates and their habits. The New Yorker article goes on:

When you look across the spectrum from Grand Junction to McAllen–and the almost threefold difference in the costs of care–you come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.

Except the cost per person are not really higher in McAllen. If you add the expatriates to the population, the cost per person drops down to the national average. Oh. Never mind.

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