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It’s a headline that’s been around for years: 90 percent of Medicaid dollars are spent on just 10 percent of the most medically needy patients. But new research from Georgia Tech shows that’s not exactly true, and the spending gap is much smaller than we think, particularly for children.

School of Industrial & Systems Engineering (ISyE) Professor Julie Swann, Associate Professor Nicoleta Serban, and Ph.D. student Pravara Harati have analyzed six years of Medicaid claims for every child in ten U.S. states to compare the differences in cost for different types of patients based on their level of health and income. They found that healthy children are actually 50 to 60 percent of the total cost in the Medicaid system in Georgia for example.

“One of the reasons that it’s different is that those headlines are primarily based on hospital costs,” explained Swann. “But when you look at the total cost in the system, including physician visits, laboratories, and medications, that’s when you find that 50 to 60 percent of the cost is taken up with these healthier patients.”

Another reason for the cost difference is that children are generally healthier than adults, so more of the cost is going to preventive care like wellness visits.

“There’s more cost for the healthy children, but this is what we want since preventive care pays off in the longer term,” said Serban.

The research team also found that Medicaid costs in urban areas of Georgia tend to be slightly higher than costs in rural areas. This could be because rural patients live further away from doctors and medical services, thus utilizing the services less.

Analyzing the claims is a computationally intensive process; it’s taken a year and a half to examine just ten states. Harati feeds all the Medicaid claims of each patient into 3M’s Clinical Risk Group Software, which then assigns each patient a code.

“The code gives you some idea of how healthy they are – whether they have any dominant chronic conditions or minor conditions, or whether they’re healthy,” she said.

Most people probably associate 3M with Post-it Notes, but the company also has developed advanced health analytics and health information systems. The 3M Health Information Systems solutions address many challenges that healthcare providers face, for example, interoperability of data systems, compliance with payer regulations, mobile physician tools among many others.

Serban, Swann and Harati have analyzed Medicaid claims in Alabama, Arkansas, Florida, Georgia, Louisiana, Minnesota, Mississippi, North Carolina, South Carolina, and Tennessee. They are now gathering data for larger states like Texas, New York, and California, and will eventually look at records for all 38 million children on Medicaid in all 50 states where data are available. They will share the results with states with the goal of reducing costs, improving health outcomes for patients, and gaining a better understanding of the Medicaid system in general, which varies from state to state unlike the federally-controlled Medicare program.

The implementation of the 3M Clinical Risk Grouping with the Medicaid claims data is relevant not only in understanding cost variations, but also obtaining prevalence of diseases and controlling for interventions. “Children with asthma who are healthy otherwise will utilize the system differently if they have other conditions, such as depression,” said Serban.

“States may have access to their own Medicaid data, but they don’t have the computational resources that Georgia Tech does,” said Swann. “When our reports on cost and disease prevalence are ready, we will share them with the states. There may be some additional things they can get from these reports.”

Children’s Healthcare of Atlanta, ISyE and IPaT are providing support for this project.