MedPAC (Medicare Payment Advisory Commission)
December 2009
In this paper, we present data on the difference between regional variation in Medicare spending and regional variation in the use of Medicare-covered services. Regional variation in Medicare spending per beneficiary reflects many factors, including differences in beneficiaries’ health status, Medicare payment rates, service volume (number of services), and service intensity (e.g., MRI versus simple X-ray). In contrast, regional variation in the use of Medicare services reflects only differences in the volume and intensity of services that beneficiaries with comparable health status receive.
… raw per capita spending is 55 percent higher for beneficiaries in the area at the 90th percentile than for beneficiaries in the area at the 10th percentile.
Service use in higher use areas (90th percentile) is about 30 percent greater than in lower use areas (10th percentile).
… the correlation between rate of growth in adjusted spending from 2000 to 2006 and the level of service use in an MSA is slightly negative.
Regional variation in service use is not equivalent to regional variation in Medicare spending. The two should not be confused.
http://www.medpac.gov/documents/Dec09_RegionalVariation_report.pdf
Comment:
By Don McCanne, MD
This paper is an important addition to the work of John Wennberg and his colleagues at Dartmouth on regional variation in spending in the Medicare program. It separates the variation in use of services by individuals with comparable health status from other factors that influence spending, especially Medicare payment policies.
The differences are important because they lead to different policy solutions. Policies to ensure adequate but not excessive volume and intensity of services are separate from, though must be integrated with, policies that establish proper levels of spending for services that Medicare beneficiaries should be receiving.
The complexities of these interdependent policies that would improve spending can be mastered only with a concerted effort by public agencies. The private insurance industry has no capability to create and apply the essential policies that would transform our health care delivery system into the efficient, affordable system that we desperately need.
MedPAC, the Medicare Payment Advisory Commission, currently provides advice to Congress on proposals to improve spending policies in the Medicare program. Congress is free to reject that advice and often does, more for political reasons than for reasons based on sound policy.
The health care reform proposal before Congress includes provisions to reduce the often perverse politics of Medicare financing by creating a commission, sometimes referred to as MedPAC-on-steroids, with much greater power to enforce its recommendations on spending.
The problem with the proposal is that the recommendations would be limited to the Medicare program alone. Unless the revisions applied to the other five-sixths of our population, it would be difficult to establish policies that would improve the overall use of health care services. Although reform of our financing system is essential, we may not get very far if we don’t have policies that would improve the structure of the health care delivery system.
We really do need an improved Medicare for all. We need to jettison the wasteful, ineffectual private insurers and get on with reform that will use our health care dollars to pay for an efficient health care system that serves all of us well.