Regional variations in health care use may be smaller than thought

Recently some experts have argued that regional variations in health care spending and utilization are contributing to the nation’s rising health costs—helping the issue emerge as an “explosive” one in this year’s reform debate—but a new Medicare Payment Advisory Commission (MedPAC) study finds that regional differences may not be as substantial as previously reported.

The Medpac publication summarizes the following findings:

  1. Regional variation in service use is not equivalent to regional variation in Medicare spending. The two should not be confused.
  2. Medicare spending varies in part because of the factors Medicare uses to account for differing wages and special circumstances, such as the wage index and health provider shortage area payments. We must adjust for those factors to arrive at service use, but the appropriate levels of those payment factors are separate issues that deserve consideration in their own right.
  3. Although regional variation in service use is smaller than regional variation in Medicare spending, it is substantial: Service use in higher use areas (90th percentile) is about 30 percent greater than in lower use areas (10th percentile). The range between the extremes shows an almost twofold difference, but, at the high end, fraud and abuse may drive some of the highest reported service use.
  4. Regions that have high levels of service use are not always the regions with high growth rates.
  5. Service use varies at all geographic levels, including within states and among providers within MSAs.

(SOURCES: Advisory Board Daily Briefing, http://advisory.com, December 2, 2009; Medpac, http://medpac.gov, accessed December 4, 2009)