Geographic Variation in Health Care Spending
February 2008
The map on the cover was generated by the Congressional Budget Office from data supplied by the Centers for Medicare and Medicaid Services. The map illustrates Medicare spending per beneficiary in the fee-for-service program on the basis of beneficiaries’ residences. (The data were adjusted for age, sex, and race.) The geographic unit is the hospital referral region, as defined by the Dartmouth Atlas of Health Care. Unshaded areas are places without residents, such as national parks, forests, lakes, and islands.
Unless otherwise noted, all years are calendar years. Because of rounding, the sums of numbers in the text and tables may not equal totals.
Preface
Per capita health care spending and patterns of medical practice vary widely across the United States. In this paper, written at the request of the Chairman of the Senate Budget Committee, the Congressional Budget Office (CBO) examines the amount of geographic variation in spending, the reasons for that variation, and its implications for evaluating the efficiency of the health care system. In keeping with CBO’s mandate to provide objective, impartial analysis, the paper makes no policy recommendations.
David Auerbach and Chapin White of CBO’s Health and Human Resources division prepared the report under the supervision of James Baumgardner and Bruce Vavrichek. The report benefited from comments by Robert Dennis, Timothy Gronniger, Douglas Hamilton, and Thomas Woodward, all of CBO. Several outside reviewers also provided comments: José Escarce of the University of California, Los Angeles, and RAND; Jonathan Skinner of Dartmouth College and Dartmouth Medical School; and Douglas Staiger of Dartmouth College. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)
Michael Treadway and Kate Kelly edited the report, and Christine Bogusz proofread it. Maureen Costantino designed and produced the cover, with assistance from Alshadye Yemane, and prepared the report for publication. Lenny Skutnik produced the printed copies, Linda Schimmel coordinated the print distribution, and Simone Thomas prepared the electronic version for CBO’s Web site.
Contents
Measuring Geographic Variation
Geographic Variation in Context
Trends in Geographic Variation
Geographic Variation in Canada and the United Kingdom
Variation in Health Care Spending by the Department of Veterans Affairs
Explaining Geographic Variation in Health Care Spending
Variation in Prices and Practice Costs
Variation in Demographics and Other Characteristics of Patients
How Supply Could Affect the Use of Health Care Services
Evidence on the Relationship Between Spending and Quality
Conceptual Models of Health Care Productivity
Reducing Geographic Variation in Spending for Health Care
1. Research on Geographic Variation in Health Care Spending
1. Health Care Spending per Capita, 2004
2. Medicare Spending per Beneficiary, by Hospital Referral Region, 2005
3. Variation in State-Level Medicare and Overall Health Care Spending per Capita
5. Dispersion in State-Level Mean Medicare Payments per Hospital Stay
6. Dispersion in State-Level Mean Medicare Payments per Physician or Laboratory Service
7. Geographic Variation in Health Care Spending per Capita in Selected Countries
8. Spending per Beneficiary on Medicare Home Health Care Services in Four States
9. Physicians per 100,000 Residents, 2004
10. Relationship Between Quality of Care and Medicare Spending, by State, 2004
11. Conceptual Model of Health Care Delivery in Different Regions
