After a three-year study, the academy’s Institute of Medicine rebuffed arguments by members of Congress from states like Minnesota and Iowa who say Medicare has shortchanged their health care providers for decades.
Congress should not create a “value index” to funnel Medicare money to areas that provide high-quality services at relatively low cost, the academy said.
The 19-member panel said such an index would be unfair because it would “reward inefficient providers in low-cost regions and punish more efficient providers in high-cost regions.”
President Obama has said the nation could save huge sums if all doctors and hospitals were as efficient as those in lower-cost states like Iowa, Minnesota, Washington and Wisconsin. But the academy said a regional value index made no sense because spending for doctors and hospitals in a single region often varied as much as spending for providers in different regions.
In its report, the group debunked some widely held beliefs about geographic variations in health spending. It found that the 10 local areas with the lowest Medicare spending per beneficiary — after adjusting for local wages and prices and the health of patients — were all in New York, California and Oregon. The areas included Rochester, Sacramento, Buffalo and the Bronx.
The panel found that the 10 areas with the highest Medicare spending per beneficiary were all in Florida, Texas and Louisiana. They included Miami; McAllen, Tex.; Houston; Baton Rouge, La.; and Fort Lauderdale, Fla.
“Areas that are high spenders in Medicare are not necessarily high spenders in the commercial insurance market,” the panel said.
Moreover, it said, neither Medicare spending nor commercial insurance spending is closely correlated with total health spending, which also includes payments for Medicaidbeneficiaries and the uninsured.
Joseph P. Newhouse, a professor at Harvard and the chairman of the panel, said regional differences in Medicare spending reflected differences in the use of services like home health care, skilled nursing care and hospice. By contrast, he said, regional differences in spending for people with commercial insurance are more likely to reflect differences in prices paid to doctors and hospitals by private health plans.
Doctors and hospitals often negotiate prices with commercial insurers. But, Dr. Newhouse said, the traditional Medicare program does not negotiate prices.
In one of the study’s notable insights, Dr. Newhouse said, “we did not find any relation between the quality of care and spending, in either Medicare or the commercial insurance sector.”
Representative Betty McCollum, Democrat of Minnesota, said: “I’m disappointed that this study failed to provide more recommendations to address geographic variation.”
But Susan Van Meter, a vice president of the Healthcare Association of New York State, said, “We are pleased that there was no recommendation for a value index.” She suggested that the comparatively low level of Medicare spending in the Bronx reflected aggressive efforts by one of its largest providers, the Montefiore Medical Center, to coordinate care for patients.
For more than three decades, researchers at the Dartmouth medical school have been documenting significant geographic differences in Medicare spending and the quality of care. Elliott S. Fisher, director of the Dartmouth Institute for Health Policy and Clinical Practice, said it would be a mistake for employers and insurers to ignore regional differences in the use of care by people with commercial insurance.
“Both price and utilization are important,” Dr. Fisher said. “Sometimes it’s easier for employers and insurers to control the overuse or inappropriate use of care.”