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Geographic Variation in Medicare Spending

By June 17, 2021Commentary

It has been a long-standing observation that there is significant geographic variation in Medicare spending per beneficiary, even after regional price adjustments.  A lot of research has been done on this topic.  Some of it finds that there isn’t that much variation when health status is taken into account and other studies find that even after those adjustments there is a lot of variation.  Most of it is attributed to different physician practice patterns and even in the same geographic location doctors are found to practice differently.  The same variation occurs for people covered by commercial insurance.  This study looked at how much of the variation might be due to social determinants of health, another hot area of research.  (JAMA Study)   Social determinants includes things like race, income, education, etc.  After appropriately adjusting for health status and other factors, these social determinants accounted for only about 6% of the variation in spending, compared to 38% before adjustment.  62% of the variation was actually explained by clinical factors relating to the patient’s condition.  The study is a good example of why adjustment for factors that might contribute to an apparent causal relationship is important.  It also reflects the limited role that social determinants play, and the more important role of patient health and condition.

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