Population health plays a larger role in geographic differences in Medicare spending than previously thought, according to a study from George Mason University and the Urban Institute.
The study of geographical differences in Medicare spending was published in the New England Journal of Medicine.
Researchers estimated the differences in Medicare spending between high- and low-cost geographic areas and the role of beneficiaries' health to explain variations, using data on Medicare spending by 6,725 elderly Medicare patients collected by the Medicare Current Beneficiary Survey from 2000-02.
Researchers measured health using an expanded set of criteria that included both pre-existing conditions and changes in health throughout the year, and also controlled for patients' demographic characteristics, family income, supplemental insurance coverage, and area-level measures of healthcare supply.
Unadjusted Medicare spending per beneficiary was 52% higher in the most expensive regions than in the least expensive regions. After adjusting for demographic and baseline health characteristics and changes in health status, researchers saw the difference in spending between the highest and lowest spending regions shrink to 33%.
The findings show that “geographic differences in Medicare spending are not necessarily evidence of inefficiency in healthcare,” said Stephen Zuckerman, a senior fellow in the Urban Institute's Health Policy Center and the lead author of the study, in a written statement.
“Our study shows that an individual's health explains almost one-third of the difference in Medicare spending per beneficiary between the highest and lowest cost areas, while previous studies have assigned a smaller role to health measures,” Zuckerman said.