Study: Medicare Spending Varies by Patients' Health

Many health policy experts, including many inside the federal government, have long believed that geographic differences in Medicare spending were the result of “wasteful practices and overtreatment.” But new research from Medical Care Research and Review suggests that 75 to 85 percent of these spending variations are the result of Medicare patients’ health differences, reports Kaiser Health News (KHN). In other words, Medicare spends more per patient in Miami than Honolulu because Florida Medicare seniors tend to be sicker than Hawaii Medicare patients and thus require more advanced care.

These new findings challenge long-held beliefs, beliefs that even influenced the Patient Protection and Affordable Care Act, reports KHN.

From KHN:

“The new paper is one of the sharpest attacks yet on the work of the Dartmouth Institute for Health Policy & Clinical Practice, whose three decades of research has popularized the theory that the unexplained regional differences in spending are due to the aggressiveness of some physicians to do more, in large part because it enriches them. 

“Dartmouth’s research has influenced a generation of health policy thinking. It helped provide a rationale for part of the health law that pushes hospitals to operate more efficiently by penalizing high cost ones.  Dartmouth researchers were also among the original architects of  ‘Accountable Care Organizations,’ to create financial incentives for physicians to avoid unneeded tests and treatments.”

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