NCPA - National Center for Policy Analysis

Medicare Cost Vary Widely Across Regions

February 21, 2002

In some regions of the United States, Medicare spends more than twice as much per person as in other regions. When adjusted for regional variation in price levels, the trend still persists. Nor does controlling for such things as the health status of the Medicare population explain the different levels of expenditure and utilization among regions.

Some of those spending variations are wide:

  • Medicare spending per-beneficiary in Miami, Fla., in 1996 was $8,414 while per-beneficiary spending in Minneapolis, Minnesota was $3,431.
  • The difference in lifetime spending between an average 65-year old Miami resident compared to a Minneapolis resident is $50,000.

Higher levels of Medicare spending are due largely to increased use of "supply-sensitive" services -- physician visits, specialist consultations and hospitalizations, particularly for those with chronic illnesses or in their last six months of life.

  • But higher spending does not result in more effective care, higher rates of elective surgery or better health outcomes, say researchers.
  • In fact, the cost of Medicare would be almost 30 percent less if all regions used care at the same rate as the least expensive regions.

Source: John E. Wennberg, Elliott S. Fisher and Jonathan S. Skinner (Dartmouth Medical School), "Geography and the Debate Over Medicare Reform," Health Affairs, Web Exclusive, February 13, 2002.

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