Big regional differences in Medicare costs

By Erica Werner

Associated Press

WASHINGTON — Medicare costs vary wildly across the country, according to a study that found the government paying twice as much for treating a patient in Miami as in San Francisco.

The dramatic cost differences don’t appear connected to climate or to who lives where, and people in the more expensive areas don’t get better care.

More expensive medical technology is only part of the picture, according to the report released Wednesday by the Dartmouth Atlas Project, which studies medical resources. The findings were being published in the New England Journal of Medicine.


The study said the differences in spending from one area to another can be blamed on decisions made by individual doctors who are influenced by what medical services are available nearby.

"Technology doesn’t drive the growth in health care spending, people do," said Dr. Elliott Fisher, the lead study author and a medicine professor at the Dartmouth Institute for Health Policy and Clinical Practice.

Fisher said physicians are not the only issue, but also questions like whether there’s a local medical health race among local hospitals or whether a community has a single hospital that is more focused on primary care.

The findings come as Congress prepares to tackle health care reform, which President Barack Obama highlighted as a priority Tuesday night in a nationally televised speech.

In his budget, Obama proposes setting aside $635 billion over the next decade to pay for health care reform. To pay for it, he suggests reducing spending on Medicare.

Medicare, the health insurance program for people 65 and older, accounts for a huge chunk of medical spending: it’s expected to cost more than $500 billion this year. The program covers about 44 million people.

The Dartmouth Atlas findings, drawn from an analysis of government Medicare data from 1992-2006, suggest great inefficiencies in care in some parts of the country. It also says there is plenty of room for reform if practices in the regions of the country that are less expensive could become the national norm.

That won’t come easy since the country’s medical system frequently rewards expensive practices, the study notes. For example, hospitals lose money if they improve care in a way that reduces admissions. Doctors don’t have a financial incentive to spend time carefully listening to a patient rather than quickly referring them to a specialist.


"There are no financial rewards for collaboration, coordination or conservative practice," the study said.

The study found that among the 25 largest hospital-referral regions, Manhattan was the costliest, at $12,114 per patient in 2006. Minneapolis was the least expensive, at $6,705 per patient.

Among states, New York spent the most per Medicare enrollee: $9,564 per patient. Hawaii spent the least: $5,311.

Medicare spent $16,351 on each Medicare enrollee in Miami in 2006 compared with $8,331 in San Francisco.

Growth rates in spending also varied a lot from one area to another.

The authors called on doctors to take the lead in bringing costs down by opting for conservative care — for example, putting a patient with heartburn on heartburn medication and monitoring their progress, rather than referring them to a specialist.

But, the study noted, doctors will need help from policymakers who should change payment systems to reward quality rather than quantity of care.

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