Spending variation and the great Dartmouth debate

Former White House budget director Peter Orszag blamed inconsistent medical care for a good share of the nation's fiscal distress when he spoke last week in Orlando, Fla. As I wrote in an earlier post, Orszag made an argument for reducing variation in healthcare delivery and pointed to research from Dartmouth College and the Medicare Payment Advisory Commission to explain his position.

That Dartmouth College research, its Atlas of Health Care, and the interest it attracted by health policy-makers as Congress and the White House wrangled over health reform, has provoked debate over conclusions drawn from the findings.

In Orlando, Orszag acknowledged one criticism of the data: Research did not adjust data for the way operating and overhead costs can vary or to reflect some patients are more complex and sick than others.

Orszag did not concede a second criticism that has dogged the Dartmouth data: Maps reflect spending differences but do more to raise questions than provide answers for what drives those differences.

The New York Times, in an article shortly after health reform became law, reported on the data's limited adjustments and said Dartmouth researchers publicly made conclusions unsupported by data. Researchers stated high-spending regions had poorer quality when studies show quality and spending are unrelated, the newspaper reported.

Dartmouth researchers countered that the reporting overlooked quality measures (PDF) and additional research to support the claim the spending variations suggest harmful waste throughout the health system.

(One recent round of debate can be found at the Incidental Economist blog.)

Orszag did not appear dissuaded by critics. He told the audience in Orlando instead to look to research published in January by the Medicare Payment Advisory Commission that looked solely at spending and utilization. The MedPAC report did adjust for regional prices and patents' health status and still found variation in overall spending and use of medical services, he said.

And Orszag proceeded to argue the spending and use variation underscored inconsistent costs and inconsistent quality—or the inconsistent value of U.S. healthcare spending.

“The bottom line is, we are practicing medicine in significantly different ways across different parts of the United States,” he concluded. “And as a result, costs vary significantly across different parts of the United States and as a result value differs significantly across different parts of the United States.”

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