Health policy wonks have been pointing for a while now to large variations in Medicare spending across different parts of the country. Live in Miami, and the government is probably going to spend a heck of a lot more for you on Medicare than if you live in Minneapolis, even after accounting for how healthy or sick you are. Here’s a picture demonstrating some of this variation from a recent article by Joseph Newhouse and Alan Garber in the New England Journal of Medicine.
The picture shows that some regions of the country spent almost $200 less than average, per month, per person while others spend almost $200 more than average, per month, per person. (The really big spike on the right side is the city of Miami. No use trying to understand Miami!)
These variations have struck many policy experts as a chance for a win-win situation. As one group from Dartmouth put it: “To slow spending growth, we need policies that encourage high growth (or high-cost) regions to behave more like low-growth, low-cost regions.” This is a controversial claim, in part because the mere existence of variations doesn’t prove that high utilization, high-cost regions are spending too much on healthcare. It is possible that the low cost, low utilization regions are spending too little. Most people, who’ve looked closely at this topic, including me, believe that much of the spending in the high-cost regions is excessive, and can be curtailed without harming health significantly. The claim is also controversial because even if you were convinced that high spending regions are offering wasteful care to their patients, it’s not clear how to cut costs without harming patients, how to cut fat without also cutting meat.
This new study, however, gives us a much better picture of where the fat and the meat might be. Look what happens, for instance, when the researchers examined spending on inpatient care, when patients are in hospitals:
The differences aren’t so big anymore. If you find this unimpressive, consider spending on outpatient procedures, when patients are seeing their doctors in clinic offices:
Downright boring. If you are looking for places to reduce regional variation in health care spending, it doesn’t look like hospitals or outpatient clinics are the places to go. Then what’s left?
This final picture displays what the researchers found when looking at spending on post-acute care, that means things like home health services, nursing homes, rehabilitation facilities, long-term care hospitals and hospices. This analysis demonstrated enormous variations in healthcare spending:
If we want to control Medicare spending, this analysis suggests we need to focus our efforts on post-acute care. Our obsession with hospital costs and physician bills may be misplaced. It could be time to look much more closely at things like the nursing home industry, the home healthcare industry, and places that specialize in long-term care. Not quite as sexy as those other topics. But worrying about sexy doesn’t help us control healthcare spending!
