According to a recent article published online in the May 12 edition of the New England Journal of Medicine, 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.
In addition to further information, policymakers need better methods for adjusting spending levels to account for underlying differences in beneficiaries' health measures, said Stephen Zuckerman, PhD, of the Urban Institute in Washington, D.C., and the Department of Health Administration and Policy of the College of Health and Human Services at George Mason University in Fairfax, Va., and colleagues.
Although considered evidence of program inefficiency, geographic differences in Medicare spending need to be better understood in terms of differences in beneficiaries' health and personal characteristics, and specific geographic factors affecting the amount of Medicare spending per beneficiary, prior to creation of policies to reduce geographic differences in spending, the authors asserted.
To observe disparities across geographic areas, the authors utilized the Medicare Current Beneficiary Surveys from 2000 through 2002 for respondents over age 64. Zuckerman and colleagues estimated multivariate-regression models of individual spending that included demographic and baseline health characteristics, changes in health status and other individual determinants of demand, and area-level measures of the supply of healthcare resources. The authors also evaluated the surveys for self-reports of whether the person had previously received diagnoses of five other health conditions, which included myocardial infarction, coronary heart disease, another heart problem, stroke or any nonskin cancer.
The research findings indicated that in geographic regions in the highest spending quintile, unadjusted Medicare spending per beneficiary was 52 percent higher than regions in the lowest quintile.
However, following adjusting for demographic and baseline health characteristics and changes in health status, the difference in spending between the highest and lowest quintiles was lowered to 33 percent, the authors wrote. In addition, health status accounted for 29 percent of the unadjusted geographic difference in per-beneficiary spending and additional adjustment for area-level differences in the supply of medical resources was not found to further reduce the observed differences between the top and bottom quintiles.
Zuckerman and colleagues said that their research showed that differences in the supply of medical resources are neither significant nor quantitatively important. “The results do suggest that supplementary insurance coverage, whether public or private, has a substantial and significant effect on individual-level Medicare spending but does not explain much of the geographic difference in Medicare spending,” they wrote.
“Policies that focus on area-level spending without adequate adjustment for differences in beneficiaries' health status could inappropriately reward or penalize certain geographic areas,” the researchers concluded, stating that without better information about the sources, causes, and consequences of geographic differences in Medicare spending, “policymakers should resist the appeal of simple solutions for limiting expenditures in high-cost areas.”