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>  News Releases >   2004 >   April

New study: states with higher medicare spending offer lower quality care

Dartmouth College Office of Public Affairs • Press Release
Contact Tamara Steinert (603) 646-3661

Greater numbers of primary care doctors yield more effective care and lower spending

States with higher Medicare spending often provide lower quality, less effective care to Medicare beneficiaries, according to a new study by Dartmouth College economists Katherine Baicker and Amitabh Chandra. The study, published in the current issue of Health Affairs, shows that spending more money does not necessarily translate into better care for the elderly.

States spending more money per Medicare beneficiary are likely spending those dollars on intensive, expensive care instead of more effective care, the study's authors said. High-spending states also are likely to have a greater concentration of specialists.

The study examined state-level differences in spending per Medicare beneficiary and the quality of care provided. Higher spending did not reflect higher quality care for patients. For example, New Hampshire, which spent about $5,000 per Medicare beneficiary, had the highest overall quality ranking, while Louisiana, which spent the most per Medicare beneficiary at $8,000 per person, had the lowest overall quality ranking.

"Health care leaders should not make the mistake of thinking that we can only improve the quality of health care delivered to elderly Americans by spending more money," said Baicker, an assistant professor in Dartmouth's economics department. "Instead, we could simply use existing dollars much more effectively."

Baicker and colleague Amitabh Chandra, also an assistant professor of economics, said that higher spending is unlikely to cause lower quality care, but is an indicator of a particular style of health care provision and resources. In fact, the composition of the physician workforce - the mix of specialists and general practice physicians in a given area - play a critical role in determining the use of highly effective care.

States with relatively more general practitioners showed greater use of high-quality care and lower spending per beneficiary. Increasing the presence of general practitioners in a state by 1 per 10,000 people was associated with a rise in the state's quality ranking and a reduction in overall spending of $684 per beneficiary. Conversely, increasing the presence of specialists by 1 per 10,000 people led to a drop in overall quality and an increase in spending of $526 per beneficiary.

Among the study's other findings:

States with lower spending often had better quality care - higher use of interventions and screening methods such as prescribing beta-blockers at hospital discharge for patients treated for a heart attack, ordering mammograms every two years for women aged 65-69 and conducting regular hemoglobin tests and biennial eye exams for people with diabetes.

States with higher spending and lower quality care had more frequent hospitalizations and use of Intensive Care Units (ICUs) for patients in the last six months of life.

Medicare patients in states that spent $1,000 more per beneficiary spent an average of 1.3 more days in the hospital and were 3.9 percent more likely to be admitted to an ICU.

The researchers based their analysis on 24 quality measures developed by the Medicare Quality Improvement Organization (QIO), as well as data from the Dartmouth Atlas of Health Care on the number of days Medicare beneficiaries in their last six months of life spend in a hospital and what fraction of them are admitted to the ICU.

Cutting Spending Not The Answer To Improving Care for Medicare Beneficiaries

Despite the link between higher spending and lower quality care, the researchers emphasize that cutting Medicare spending to improve quality could have the undesirable effect of reducing the quality of medical care in high-spending states even more. Instead the authors suggest concentrating on policies that improve the quality of care for beneficiaries, such as establishing national practice benchmarks for basic quality measures, and encouraging greater access to general practitioners.

"Improving quality of care has everything to do with how the money is spent," said Chandra. "And there is good evidence that, in many cases, we are not spending it wisely now. We need to determine how to make better use of health care dollars, especially with the baby boom generation about to enter the Medicare system in the next few years."

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