Thursday, June 11, 2009

Medicare Costs: "All Politics are Local"

Former House Speaker Tip O’Neill famously said “All politics is local”, and so it seems to be in the discussions of Medicare costs.

The enormous disparities in Medicare spending between states and regions, on a per-beneficiary basis, even controlled for severity of illness and other variables, has been well documented by good scholarship primarily from the researchers at the Dartmouth Atlas of Health Care ( ). It has been an issue that Peter Orszag, President Obama’s Director of the Office of Management and Budget (OMB), has focused on, and that has gained increased traction since the publication of Atul Gawande’s article, “The Cost Conundrum” in The New Yorker June 1, 2009 ( The New York Times’ Robert Pear (“Spending disparities stir a fight in effort to overhaul health care”, June 9, 2009,, reports that the President has made this article required reading for his health reform team.

Gawande’s article focuses on the border town of McAllen, TX, where, incredibly, Medicare spends more per patient than anywhere in the country, about $15,000 per enrollee per year. This is more than twice what Medicare spends in the comparable border city of El Paso, and even more incredibly about $3,000 more than the average annual per capita income of this Rio Grande Valley town. He goes on to interview doctors and hospital administrators in McAllen who, alternately, express shock and disbelief at this statistic or assert that it because they give better care than other areas. Gawande takes several telling diversions from his discussion of McAllen to look at the research documenting wide disparities of spending in other, larger cities and metropolitan areas, and to try to figure out why this is so. He notes the work of Baicker and Chandra from Dartmouth, cited more than once on this blog, that documents an inverse relationship, on a state basis, between the amount spent by Medicare and the quality of care delivered ( ) He notes that some of the lowest costs are in Seattle, WA, Rochester, MN (home of the Mayo Clinic), Durham, NC (home of Duke); some of the highest are in Boston, New York, and Los Angeles. San Francisco, with outstanding health institutions and a high cost of living, is about the national average. He cites the 2003 study by Elliott Fisher, also from Dartmouth, who
“…examined the treatment received by a a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse…To make matters worse, Fisher found that patients in high-cost areas were actually less likely to receive low-cost preventive services, such as flu and pneumonia vaccines, faced longer waits at doctor and emergency-room visits, and were less likely to have a primary-care physician. They got more of the stuff that cost more, but not more of what they needed.” [1]

This data has just been updated, with new analysis, by Fisher and colleagues in the New England Journal of Medicine[2] ( showing that, as described in the summary press release from the Robert Wood Johnson Foundation (which funded the research) ( costs are rising “…more than twice as fast in Dallas as in San Diego, and Medicare now spends nearly three times more to care for its enrollees in Miami than it does in Honolulu” , and that:

Where Medicare spending per enrollee grew at an annual rate of 5 percent in Miami, the rate was less than half, at 2.4 percent, in San Francisco. Medicare spent $16,351 per enrollee in Miami in 2006, almost twice the spending of $8,331 in San Francisco. The contrasting history of spending in San Francisco and East Long Island shows how even a slight difference in growth rates can make a large difference over time. Both regions had nearly identical spending per enrollee in 1992. But where San Francisco grew at 2.4 percent for the next 14 years, spending in East Long Island exploded at 4 percent. So, by 2006 spending in East Long Island was $2,300 more per enrollee than in San Francisco—about $1 billion in additional annual Medicare spending in a single region.”

Gawande quotes Peter Orszag as saying “Nearly 30% of Medicare’s costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level of low-cost areas.” This is pretty compelling stuff. Even more compelling is looking at and “playing with” the interactive map at the Dartmouth Atlas website yourself It is quite remarkable, and even fun. While the map in the NY Times article shows spending by state, the Dartmouth site provides it by “Hospital Referral Region”, that takes into account that there are many practice regions that cross state lines, as well as large differences in practice and Medicare costs in different regions of the same state. You can move your cursor over the map and bring up detail on each of these different regions. (e.g., the Kansas City region had a 2008 cost per beneficiary of $7,604, a 2.86% increase from 1992, while Wichita’s 2008 cost of $7,655 was a 4.17% increase).

But, as compelling as the data may be, all politics is local. The NY Times article cites immediately negative comments from the high-cost states. An aide to Sen. Bill Nelson of Florida said he was “`adamantly opposed’ to the proposed cuts in higher spending areas because the cuts did not distinguish between necessary and unnecessary care.” This is incorrect; the studies looked at comparable care. Gawande cites another Dartmouth study by Sirovich, et. al. [3]: “She and her team surveyed some eight hundred primary-care physicians from high-cost cities (such as Las Vegas and New York), low-cost cities (such as Sacramento and Boise), and others in between. The researchers asked the physicians specifically how they would handle a variety of patient cases. It turned out that differences in decision-making emerged in only some kinds of cases. In situations in which the right thing to do was well established—for example, whether to recommend a mammogram for a fifty-year-old woman (the answer is yes)—physicians in high- and low-cost cities made the same decisions. But, in cases in which the science was unclear, some physicians pursued the maximum possible amount of testing and procedures; some pursued the minimum. And which kind of doctor they were depended on where they came from.” Mayo -- in Minnesota, or Florida, or Arizona -- costs less, points out Gawande, because physicians are salaried and work in an organized integrated health system, as does the Geisinger Clinic in Pennsylvania, often identified as a leader in this area. He describes Grand Junction, CO, with an average per-beneficiary cost of $5873 and very high quality ratings, where physicians have agreed to charge the same fee to Medicare, Medicaid and private insurers.

Sen. John Kerry of Massachusetts said: “There is too much uncertainty about the Dartmouth study to use it as a basis for public policy. Researchers can’t explain why some areas of the country spend more on health care than others. There could be many reasons spending could vary: higher costs of living, sicker people or more teaching hospitals.” Nice, but wrong. There is not uncertainty; the studies consistently show the same thing. Why the costs vary is the subject of Gawande’s article, but cost of living doesn’t cut it (the cost of living in McAllen is way less than in San Francisco but Medicare spending is much higher). Teaching hospitals is another story. Clearly they do cost more. But even if we were to agree with Sen. Kerry’s statement that “States like Massachusetts are concentrated centers of medical innovation where cutting-edge treatments are tested and some of the nation’s finest doctors are trained. This work might cost a little more but it benefits the entire country,” this doesn’t explain it all. Mayo Clinic has great training and cutting-edge research; McAllen has little (there is a great family medicine residency program that operates at low cost, in contrast to the rest of the town, and provides excellent care to many poor people). It has much more to do with practice patterns and culture.

It has to do with money coming into the state, and all politics are local. Sen. Kerry and Sen. Nelson are likely to be joined by other “progressive” senators from big high-cost states such as Sen. Charles Schumer of New York (remember his impassioned support for the finance industry, based in his state), and Sens. Barbara Boxer and Dianne Feinstein of California, as well as others. Unless, of course, they can figure out that the care in Feinstein’s San Francisco (2008 cost: $8,331, 2.36% increase from 1992) is as good as in Boxer’s Los Angeles ($10,810 3.04%) and at least as good as Nelson’s Miami ($16,351, 4.99%).

What we have to hope for is that, all politics being local, the senators representing the lower cost states, Republican and Democratic, liberal and conservative, can outnumber those from the high cost areas and vote for the right thing, and do something about this to control the cost growth of Medicare; reducing high-cost areas to low cost areas would eliminate the bankruptcy threat. Because, on this one, as a result of all politics being local, Kerry and his allies are in the wrong.

[1] Fisher ES, “Medical Care – is more always better?”, N Engl J Med. 2003 Oct 23;349(17):1665-7
[2] Fisher ES, Bynum JP, Skinner JS, “Slowing the Growth of Health Care Costs — Lessons from Regional Variation” NEJM 2009 Feb 26;360(9):849-52.
[3] Sirovich B, Gallagher PM, Wennberg DE, Fisher ES, “Discretionary decision making by primary care physicians and the cost of U.S. Health care”, Health Aff (Millwood). 2008 May-Jun;27(3):813-23.

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