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Posted 04/13/01
Reprinted from the Providence (R.I.) Journal-Bulleting, March 17, 2001
By Elliott Fisher and Jonathan Skinner
At his confirmation hearings, Health and Human Services Secretary Tommy Thompson put comprehensive Medicare reform back on the table. The need for reform is widely recognized, even under current law the boomers are on course to clean out the Medicare Trust Fund by 2021. Before Congress and the new administration dig into the details, they should confront one important myth about the Medicare program - that more spending buys better quality.
A recent article in the Journal of the American Medical Association provides a good starting point. The authors reported serious shortcomings in the quality of care across all states. By state, New Hampshire and Vermont did the best while Arkansas and Mississippi did the worst. On the face of it, this study might sound like a clarion call for Medicare reform to spend more in the struggling states.
A comparison of state-level per-capita Medicare spending and the state-level quality of care tells a different story. The Figure (below) shows the state-level rankings of quality of care (with 1 being the best and 51 the worst ranking) contrasted with state-level per-capita Medicare spending in 1997. The Medicare spending is adjusted for the fact that some states have more elderly people in the population, or a sicker population. (The elderly in states like Louisiana and West Virginia are indeed sicker - and we allow for their greater health needs in calculating per-capita Medicare spending.) The spending data, from the Dartmouth Atlas of Health Care Working Group, do show remarkable differences in per-capita Medicare spending across states, ranging from $2763 in Oregon to $5668 in Texas and $6307 in Alaska. The pattern of the dots, each of which represents a state, shows that more spending per capita does not appear related to better quality - if anything, it appears to be associated with worse care.
What's going on? We don't actually think that increasing spending will reduce the quality of care. Connecticut and Massachusetts are both high cost states, but ranked in the top ten in terms of quality. Instead, we think that spending on Medicare is largely independent of how well physicians follow clinical guidelines for appropriate care such as giving the right set of drugs for heart attack patients, or screening for common and treatable diseases. High quality care is not necessarily expensive care.
Then what's going on in high cost states? Our research shows that spending more does not offer any benefits: the elderly in high cost states don't live any longer. High cost regions simply provide more care. They rarely on inpatient and specialist care more than outpatient and primary care, and tend to treat the chronically ill and those near death much more aggressively, with possible adverse effects on their quality of life. This pattern of practice is not driven by medical evidence, but instead by community norms and the availability of hospital beds and health facilities.
What should we do? First we need to address the serious deficiencies in the quality of care highlighted by these and other reports. Because state-level data hide important differences within states, Secretary Thompson should support and extend current federal efforts to monitor the quality of care for major markets and health systems. Quality of care should and can be improved, but the costs of monitoring and improving quality need not increase overall spending.
Second, we should stop ignoring the regional differences in Medicare spending. There appears to be no benefit from the higher Medicare spending in high cost regions. This suggests that the Medicare program can safely pay for many needed reforms, such as expanded prescription drug coverage, by scaling back expenditures in the high cost states to levels commensurate with those in the low cost, high quality states. And this can be done without raising an extra dollar in premiums.
The implications for Medicare reform policy are clear - quality of care should and can be improved, but it need not put more pressure on the long-term financial viability of the Medicare program. The new Congress should try to spend smart, not spend more.
Elliott Fisher is Professor of Medicine and Community and Family Medicine and codirector of the Outcomes Group at the Veterans Affairs Hospital White River Junction, Vt., and Jonathan Skinner is the John French Professor of Economics, Dartmouth College, and a research associate with the National Bureau of Economic Research.
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