The Geographic Gap in Medicare Spending Reflects Health Differences

May 30, 2013

Is it that simple? Perhaps health care spending really does reflect health differences. A recent study from the journal Medical Care Research and Review indicates health care spending tracks closely with the health status of local populations.

Prior studies based their results on cost of living and various regional adjustments but never health status. The new study explains that health differences around the country account for 75%-85% of cost variations. “People really are sicker in some parts of the country.” said Dr. Patrick Romano, one of the authors of the study.  The Dartmouth Institute for Health Policy and Clinical Practice has long asserted that variations in regional spending are due to the aggressive practices of doctors and high rates of diagnosis in certain areas. The new research contests this by examining hip fractures, head injuries and heart attacks, in which there is little discretion in diagnosis. The geographic variations in spending for these conditions remained consistent with conditions that allow doctors leniency in diagnosis. According to this new data, cutting or placing spending caps on doctors and hospitals in higher spending areas may be detrimental. Some areas spend more money per beneficiary because…the people are sicker.

So, it’s not really that simple. But health status may account for more of the spending gap than we previously thought.

The full study is available by subscription to SAGE journals or for individual purchase here:

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