The American Academy of Pediatrics is pleased to announce the 2009 Pediatric Medical Cost Model, an actuarial analysis of net medical costs paid by insurers for physician services for children during 2008.

Prior to its acquisition by Ingenix Consulting in 2007, Reden & Anders, Inc. provided the 2004 and 2006 Pediatric Medical Cost Models based on 2002 and 2004 actuarial data, respectively. This year, a division of Ingenix Consulting embodying the former Reden & Anders, Inc. was engaged to update the physician services component of the AAP Pediatric Medical Cost Model based on 2008 actuarial data. A report summarizing state-by-state average Medicaid*-to-Medicare and commercial-to-Medicare physician payment ratios was also provided as a new component of the study.

Recognizing that Ingenix Consulting was implicated in a recent lawsuit alleging flaws in a database used by the company to produce out-of-network physician charges, concerns were raised by the AAP with Ingenix Consulting. In response, the actuaries provided explanation regarding the integrity and independence of the data used to build the AAP models. [See section titled "Ingenix Lawsuit" on pages 5-6 of "Methodology and Documentation"] The chairs of the AAP Committee on Coding and Nomenclature and Private Payer Advocacy Advisory Committee were consulted for their assessment and advice whether the entity that provided the previous Cost Models, which had now become Ingenix Consulting, should continue to conduct the AAP study. Upon review of information provided by the actuaries, both chairs concurred that the independence of the database used for the AAP study from the rest of the Ingenix data system provided reasonable safeguard for the integrity of the study. The study proposal received final review and approval by the AAP Executive Committee in March 2009 and the final study was completed in July of the same year.

The current model enables state and locale-specific estimation of medical cost (plan-to-provider payment) for medical services to children, such as vaccine administration, preventive and routine office visits, and other physician services. While simple to use, the model allows for a wide range of applications. It can, for example, be used to estimate national or state average PMPM for providing physician service in Medicaid/SCHIP or commercial plans. Alternatively, users can customize a number of model parameters to estimate benefit-specific PMPM at any level of co-payment or coinsurance, and for any patient age/gender mix in either or both rural and urban areas in any state.

Nationally, PMPM (per-member-per-month medical cost) to cover each child for physician services in commercial plans averaged $54.76 in 2008. PMPM for Medicaid/SCHIP children enrolled in predominantly managed care plans was estimated at $44.37 for the same period. As of 2008, average Medicaid/SCHIP physician payment for pediatric services was estimated at 72% of Medicare as of 2008, compared to 70% in 2004 and 65% in 2002. Commercial-to-Medicare physician fees were estimated at 113%, 111% and 115% for 2008, 2004, and 2002, respectively.

*Medicaid costs in this study are based on average Medicaid and SCHIP data.

IMPORTANT NOTICE AND DISCLAIMER

The study reflects aggregated historical information. It is designed to assist both providers and purchasers of health care services in making independent decisions regarding practice management and the provision and purchase of health care services. The study is being offered for informational purposes and does not reflect the official position of the American Academy of Pediatrics on issues relating to costs or other fee-related information. Study data may not be used for the purpose of fixing prices, fees or other charges or to limit competition or restrain trade in any manner. Improper use of this information is prohibited by federal and state antitrust laws and is subject to severe penalties. The Academy recommends that the user consult with competent legal counsel about any questions the user has regarding the use of the study data.

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