This article examines the factors behind geographical variation in Medicare spending.
Two decades of research, driven by the Dartmouth Atlas of Health Care, suggest that there are substantial differences in Medicare spending by region. Furthermore, this body of research suggests that differences in spending do not correlate to quality of medical care and that the primary cause of these differences is variation in medical resource capacity. Since proposed reforms aim to use geographic variation to control health care costs in high-cost regions, more research is needed to understand the underlying reasons behind geographical variation in spending.
The authors analyzed data from 6,725 beneficiaries in the Medicare Current Beneficiary Surveys from 2000-2002. They used a series of linear multivariate regression models to assess the impact of individual health changes, demographics and area-level measures of health care supply on Medicare spending by region.
Geographical variation in Medicare spending has complex roots. While some of the variation can be explained by variation in health among the populations covered, the majority of spending variation cannot be linked to health or demographics. Without a more robust understanding of the causes of variation, policy-makers should exercise caution in developing policies to curb spending in high-cost regions.