Variation in Health Spending

The current issue of the Journal of the (Woke) American Medical Association has a couple of interesting studies on geographic variation in health care.  This topic has provoked a lot of research over the last couple of decades as people try to understand why per person health care spending, on a person with the same health status, can be so different geographically, or even by payer or physician within the same area.  The hope, of course, is that there is something we could learn from the low-spending areas and apply to the high-spending ones in the interest of reducing overall health costs.  Of course that would assume that low-spending areas aren’t neglecting needed care.

You will recall the two basic components to health spending–how many units of a product or service and how much does each unit cost.  It can get a bit more complicated if you look at episodes of care for a particular condition, because “intensity” of treatment may change over time and new products and services occasionally replace older ones.  So part of these geographic variation analyses attempt to ferret out is how much of the variation is price and how much is utilization.  To make these comparisons, you need to first adjust for age, sex, health status and other factors that may influence spending.  These authors did some of that.  Their area unit was a county and they identified spending variation by condition from 2010 to 2019, covering all payer types.

One finding was that cardiovascular disease was the aggregated disease category on which spending was highest at $265 billion in 2019, followed by cancers at $259 billion and musculoskeletal at $245 billion  dentistry at $93 billion and heart disease at $81 billion.  42% of spending was for outpatient care, 24% for inpatient hospital care, 14% for drugs, 7.5% on nursing care, 5.6% on dental care, and 5.1% on home health care.  The range of annual spending by geography was $3410 per person in an Idaho country to $13332 in Nassau County, New York.  That is quite a range.

Just to show you where things are in our lovely country, the fastest growing categories are for autism and drug, alcohol and other substance abuse.  The highest variation was in private health plan spending, compared to Medicaid or Medicare.  Medicare had the lowest variation due to the fact that it dictates price.  Utilization was somewhat more of a contributor to variation than were unit prices.  (JAMA Article)