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New Study: Geography Doesn’t Explain Variations in Medicare Spending

Socioeconomic factors play a much greater role than geography in explaining variations in Medicare spending.

According to a new report from the Brookings Institution,

Underlying socioeconomic and demographic characteristics have important implications for the geographic patterns in Medicare spending.  The findings contradict prior research claiming that most of the variation in Medicare spending can be attributed to geographic differences in medical “practice styles.”

iStock_000005787159XSmallAs a result, according to the study, “…geographic variation in health care spending does not provide a useful measure of inefficiency and waste in the system” because, among other reasons, “…cross-state variation in Medicare spending is tightly associated with the characteristics of state populations, and once these characteristics are controlled for, the variation in spending is fairly small.”

This conclusion contradicts previous findings suggesting that variations in Medicare expenditures were based largely on geography, which in turn gave rise to suggestions that Medicare payments to providers should be adjusted to reflect those variations by reducing payments in high-expenditure areas and increasing them in low-expenditure areas.  The National Association of Urban Hospitals (NAUH) has long questioned the notion that variations in Medicare spending can be attributed to geography alone and has opposed past proposals to adjust Medicare payments based on geography.

Learn more about this new perspective on differences in Medicare spending in “Why the Geographic Variation in Health Care Spending Can’t Tell Us Much About the Efficiency or Quality of Our Health Care System,” a new report from the Brookings Institution that can be found here.


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