Study may debunk theory that health supply breeds demand

Just 13 years ago, health economists thought the United States had too many doctors, which attracted a surplus of patients clamoring for care, thereby driving up health costs. Thus, the Balanced Budget Act of 1997 froze the number of Medicare-funded residency training slots at 1996 levels, which some believe contributes to the provider shortages we suffer today.

But a new study published in the New England Journal of Medicine questions the traditional thinking, supported by The Dartmouth Atlas Project, that more healthcare resources help trigger higher per-capita spending. Stephen Zuckerman, PhD, a senior fellow in health policy at the Urban Institute, and colleagues analyzed Medicare spending on 6,725 patients collected from 2000 to 2002 and found Medicare spending per beneficiary ranged from an average of $4,721 in the least expensive regions to $7,183 in the most expensive regions.

Dividing the geographic regions into quintiles based on their per-capita Medicare spending, researchers found that adjusted Medicare spending per beneficiary was 33 percent higher in geographic regions in the highest spending quintile compared to those in the lowest quintile (unadjusted spending was 52 percent higher).

After analyzing the variables, the team determined that an individual's health explains almost one-third of the difference in Medicare spending per beneficiary between the highest and lowest cost areas--while differences in the supply of health resources did not narrow the gap. However, the authors said that more than 60 percent of geographic variation remains unexplained--and that policymakers ought to research the mystery before using regional data toward cost-cutting moves.

"Policymakers attempting to control Medicare costs by reducing differences in Medicare spending across geographic areas need better information about the specific source of the differences, as well as better methods for adjusting spending levels to account for underlying differences in beneficiaries' health measures," Zuckerman and colleagues wrote.

Hematologist Richard Cooper, MD, a professor at the Leonard Davis Institute of Health Economics at the University of Pennsylvania, Philadelphia, told Medscape Today that the NEJM study should be used to correct health policy that has limited the number of physicians over the past 13 years. "If Dartmouth is wrong, then the caps are wrong; and if the caps are wrong, we need to expand graduate medical education," he said.

To learn more:
- read this Medscape article
- read the study published in the NEJM
- check out this Reuters piece
- read this HealthDay piece via Modern Medicine