The Institute of Medicine’s geographic variation in health spending report

It was mandated by the Affordable Care Act (ACA), was years in the making, and is now out. I have not read it (yet). But I did read Elliott Fisher and Jonathan Skinner’s summary. The key passage that explains the IOM’s findings is this:

The report confirmed three core findings of Dartmouth’s research.  First, geographic variations in spending are substantial, pervasive and persistent over time — the variations are not just random noise.  Second, adjusting for individuals’ age, sex, income, race, and health status attenuates these variations, but there’s still plenty that remain.  Third, there is little or no correlation between spending and health care quality.  The report also effectively identifies the puzzling empirical patterns that don’t fit conveniently into the Dartmouth framework, such as a lack of association between spending in commercial insurance and Medicare populations.

The committee also confirmed earlier work by Harvard investigators showing that, for the commercially insured population, variations in the prices paid by private health plans explain most of the variations in private insurance spending.  The committee deserves considerable credit for deepening our understanding of this irrational world of pricing commercial health care services.  Yet as the report finds, even in the commercially insured population, there are substantial differences in utilization rates across regions.  We would therefore argue that for commercial populations both price and utilization deserve attention, especially because in many regions, avoidable utilization may be easier to address than price.

It is Medicare spending growth, however, that represents arguably the greatest risk to the financial health of the U.S Treasury, and in Medicare, variations are almost entirely the consequence of utilization of services, not prices.  The report finds that the single largest component of the variation in Medicare spending across regions that remains after risk and price adjustment is due to post-acute care (including skilled nursing facility services, home health care, hospice, inpatient rehabilitation and long term acute care). These services have also been a major source of growth.

Click through for the rest from Fisher and Skinner, including a summary and commentary of the IOM committee’s recommendations, as well as a defense of a geographic lens.




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