Varied Medicare costs due to patient health, not geography

Medicare cost variations across geographical regions have more to with health status than wasteful spending or inefficient care practices, according to study published online yesterday in the journal Medical Care Research and Review.

Researchers from the Center for Studying Health System Change (HSC) and UC Davis Center for Healthcare Policy and Research (CHPR) analyzed claims from 1.6 million Medicare beneficiaries in 60 representative communities and found population health explained at least 75 percent to 85 percent of Medicare cost differences between high- and low-cost areas.

The study showed patients are sicker in high-cost regions, indicating waste and inefficiency are not to blame for varied Medicare costs.

The findings also question previous research, such as Dartmouth Atlas of Healthcare analyses, that strongly link geography and healthcare inefficiencies, according to the research announcement. HSC and CHPR researchers suggest accounting for differences in population health before adopting treatment patterns found in low-cost areas.

"The trouble with Dartmouth is they were trying to spin a simple story from a world which is far more complex and far more nuanced," lead author James Reschovsky of HSC told Kaiser Health News. "They are to be credited for highlighting that there's a lot of inefficiency in the delivery of healthcare in the United States. They defaulted by hanging their hat on geographic determinants of efficiency, and I think that premise is fundamentally being torn down, not only by my research, but also by the IOM work and a bunch of other studies," he said.

Yesterday's study reinforces HSC conclusions from 2011, when it determined the health of elderly Medicare patients is the single biggest factor in driving Medicare costs, not market dynamics or the provider.

Earlier this year, preliminary research by an Institute of Medicine (IOM) study group also cast doubt on theories that Medicare spending could be cut if treatment patterns in low-cost regions were adopted nationwide, FierceHealthcare previously reported. The IOM cautioned against geographic-based reimbursements, noting that basing Medicare reimbursements on a geographic value index would likely "reward low-value providers in high-value regions and punish high-value providers in low-value regions."

For more:
- here's the study abstract
- check out the research announcement
- read the KHN article