More health care spending isn’t always better

Medicare spending in 2006 varied more than threefold across the U.S. hospital regions.  Some of this variation is due to differences in prices paid for similar services and some is due to differences in the illnesses people experience.  But even after accounting for such factors, a twofold difference exists. 

That difference is almost entirely explained by the volume of health care services received by similar patients. 

This startling finding is included in the February 2009 report of the Dartmouth Atlas Project, a research initiative of the Dartmouth Institute for Health Policy and Clinical Practice.

According to the report, Medicare beneficiaries in high-spending regions do not receive more effective care.  Nor do they receive more elective procedures.  "Rather, the additional services all fall into the category of 'supply-sensitive care':  discretionary care that is provided more frequently when a population has a greater per capita supply of medical resources.  Higher-spending regions have more hospital beds, more physicians overall, and more specialists per capita.  Patients in high-spending regions are hospitalized more frequently, spend more time in the ICU, see physicians more frequently, and get more diagnostic tests than identifcal patients in lower-spending regions."

The report goes on to state that spending more money would not be controversial if it produced better health care or better outcomes.  However, the research does not show that patients in higher-spending regions had better outcomes.  "The findings are remarkably consistent:  higher spending does not result in better quality of care."

The report discusses the implications of its findings, including the need for payment reform.  The current system is flawed, the report states, because it rewards more care, regardless of the value of that care.