How much U.S. healthcare spending is effectively wasted? A big part of the debate centers on the major geographical variations in Medicare costs that researchers at Dartmouth University have exhaustively documented. Now new Medicare data casts doubt on whether those differences are actually as large as previously thought.
That may cheer defenders of the status quo, but there are still two really important caveats: the variations are too large to be random, and the U.S. spends twice as much as other advanced countries on healthcare without getting better outcomes.
The basic thrust of the Dartmouth research was to note that patients in some parts of the country -- Miami, for instance -- are treated much more heavily (and expensively) without faring any better than those elsewhere, who saw fewer doctors and got fewer tests. Pioneered by Jack Wennberg, the work -- now regularly tabulated in the Dartmouth Atlas of Healthcare -- was one the first to suggest that a significant fraction of U.S. healthcare spending is simply wasted.
Medicare did its study after a request from the Institute of Medicine, which is conducting research on geographical healthcare variations for the federal government. After adjusting for the relative sickness of patients and certain local cost factors, it found that 27 of the country's 306 hospital service areas spent less than average rather than more than average, as the raw data indicated. Sixty of the hospital markets that appeared to be low spenders in unadjusted terms were actually above-average spenders.
According to James Reschovsky, a senior researcher at the Center for Studying Health System Change, the CMS analysis shows that the variation among regions is about a third smaller than other studies have indicated.
Nevertheless, the CMS report shows big cost differences between some regions. In 2008, for example, Medicare spent $9,468 for the average beneficiary in Monroe, La., but only $4,959 in Honolulu. So even with case mix and local costs factored in, something else is driving these variations.
There's a lot of talk about changing Medicare payments to reward cost-effective, high quality care. That's logical -- and in fact, the Affordable Care Act provides several incentives to move in that direction. But, nobody's saying that Medicare should reduce all hospitals' payments to the level of the most efficient providers to drive costs down. That would be counterproductive, because there are many reasons for cost differences, and cutting payments to less efficient providers would probably just hurt the quality of care without changing how it's delivered.
What does make sense is to find how the high-quality, cost-efficient groups do it and disseminate that information to other providers across the country. That's the goal of a new collaborative that was formed last December. The collaborative's members include Cleveland Clinic, Dartmouth-Hitchcock, Denver Health, Geisinger Health System, Intermountain Healthcare, the Mayo Clinic, and the Dartmouth Institute for Health Policy and Clinical Practice, which has spearheaded the variations research at the center of the debate.
Not all doctors see a need for change, however. Some physicians in academic medical centers bridle at the idea that their high-tech interventions may not always be justified. Ronald Reagan UCLA Medical Center, in particular, has strongly defended its approach, which is to go to any length to save lives. Of course, that approach costs an average of $50,000 per Medicare patient for end of life care, vs. $25,000 at the Mayo Clinic, where a more conservative style of medicine is practiced. But the UCLA doctors argue that research showing that their results are no better than those of lower-cost institutions looks only at the patients who died, not the ones who survived.
Well, it's certainly true that for a patient who survived with a good quality of life, UCLA's heroic efforts were well worth the money. But not everybody wants heroic efforts to keep them alive when they're facing near-certain death. It's also clear that our country can no longer afford to pour huge amounts of money into high-tech medicine when it's becoming increasingly difficult to get primary care.
Somewhere along the way, tough choices will have to be made.
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