CMS Incorporates New Factors Into Analysis of Medicare Spending

Some areas of the U.S. that previously were cited for high levels of Medicare spending actually had below-average Medicare spending rates once patient health and geographic cost factors were taken into account, according to new data from CMS, Kaiser Health News reports.

The Institute of Medicine requested the CMS data as part of its efforts to analyze regional variation in health care spending. IOM is tasked with making recommendations about Medicare to HHS Secretary Kathleen Sebelius.

Previous Research

For decades, many researchers have contended that health care providers in high-spending areas are performing unnecessary procedures to obtain higher reimbursement from Medicare's fee-for-service payment model.

Such research has been used to support claims that as much as one-third of the $2.7 trillion in expected U.S. health care spending this year might be unnecessary.

New Analysis

According to the CMS data, 27 of the 306 U.S. hospital markets shift from above-average spenders to below-average spenders after accounting for patient health and geographic cost factors. Contra Costa County is one such hospital market.

In addition, 60 hospital markets shifted from below-average spenders to above-average spenders after researchers adjusted for patient health and geographic cost.

Experts Respond

James Reschovsky -- a senior researcher at the Center for Studying Health System Change -- said the CMS data show that much of the regional differences in Medicare spending can be explained by the overall health of patients in a particular area.

Michael Chernew, a health policy professor at Harvard Medical School, said regional variations in health care spending are a complicated issue. He said, "Even once you do the adjustments, you'd still reach the conclusion there's so much variation in the health care system it's hard to explain that as random chance" (Rau, Kaiser Health News, 3/8).