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Medicare Spending Still Varies by Region
By Reed Abelson, The New York Times
February 25, 2009
Medicare spending continues to vary widely across the country, with some cities like Miami and Dallas experiencing much faster growth in costs than places like San Francisco and Pittsburgh, according to an analysis by Dartmouth researchers.
In their analysis, to be published Thursday in The New England Journal of Medicine, the researchers say that addressing the wide variations in the cost of care for the elderly will be critical to any overhaul of the nation’s health care system envisioned by the Congress and the Obama administration.
The regional differences in the growth of Medicare spending suggest doctors are helping to drive up costs when they more frequently order tests or admit patients to the hospitals. In areas where there are plenty of hospital beds and sophisticated imaging equipment available, doctors generally spend more on their patients.
“The incentives are there for growth,” said Dr. Elliott S. Fisher, the director of the Center of Health Policy Research at the Dartmouth Institute for Health Policy and Clinical Practice and one of the work’s authors.
While the specific dynamics of the local markets vary, he said, the current payment method fuels spending by encouraging hospitals and doctors to try to expand their services. He said any attempt to rein in health care costs, as President Obama has repeatedly vowed to do, needs to address how doctors and hospitals are paid, where they are rewarded on the basis of the volume of services they perform.
A former Bush administration health official agreed. “As long as Medicare pays for volume and intensity, that’s what you’re going to get,” said Dr. Mark B. McClellan, a health policy specialist at the Brookings Institution who oversaw the Medicare program during part of the previous administration.
Some areas, like Miami, where many doctors schedule monthly appointments for heart disease patients, are experiencing the fastest rise in health care costs. Medicare spending there rose 5 percent a year from 1992 to 2006, compared with 2.4 percent in San Francisco, according to the Dartmouth group. Medicare spent about $16,000 per enrollee in Miami in 2006, compared with about half as much in San Francisco. The figures are adjusted for inflation.
“This new research only reinforces the importance of enacting comprehensive health reform this year,” said an aide to Senator Max Baucus, the Montana Democrat who is a central figure in the discussions of an overhaul to the current system.
Both Dr. Fisher and Dr. McClellan advocate a new payment method that would reward doctors for providing better care and would share with them any savings they generated by keeping patients out of the hospital or choosing not to order another test. Medicare has had some success with some experiments along these lines, said Dr. McClellan, who also cites a few places like North Carolina where private insurers are joining forces with the state to try new approaches to payments.
The Obama administration has already signaled its interest in attacking the variations in spending as a way of controlling costs and potentially shifting resources, some policy specialists say. “It is a virtual certainty within the next two years,” said Uwe E. Reinhardt, a Princeton economist who specializes in health care. “We will address these variations,” he said, including possibly proposing regional limits on spending to try to address the areas with the highest costs.
The Dartmouth researchers estimate that if the federal government could find a way to make sure the national health care bill increased no more quickly than that of a city like San Francisco, it could eventually save tens of billions of dollars.
The findings, Dr. Fisher said, also suggest the country could potentially absorb the additional costs of insuring the 46 million people who are currently without coverage without necessarily experiencing a significant spike in spending to handle the increased demands of new patients.
“There’s plenty of capacity to support them,” he said.
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