A recently published study reports that geographic differences in the amount that Medicare reimburses hospitals varies not by wasteful overtreatment by instead by population health differences across the country. The authors point out that these differences in health explain explain between 75% and 85% of the cost variations.
The study might seem like a sour note to those who believe that huge savings in health care can be achieved by making the system more efficient and inducing those “aggressive treatment” areas to reduce wasteful spending. Researchers at the Dartmouth Institute for Health Policy claim that the study is fatally flawed, and that regional differences in spending are much more dependent on overtreatment and wasteful practice.
But even if the new study is correct, somewhere between 15 and 25% of the differences in regional Medicare spending are NOT explained by the underlying health of the region’s population. That’s still a sizeable chunk of money, and certainly an area worth improving.