Geographic variation in fee-for-service medicare beneficiaries' medical costs is largely explained by disease burden

James D. Reschovsky, Jack Hadley, Patrick S Romano

Research output: Contribution to journalArticlepeer-review

19 Scopus citations

Abstract

Control for area differences in population health (casemix adjustment) is necessary to measure geographic variations in medical spending. Studies use various casemix adjustment methods, resulting in very different geographic variation estimates. We study casemix adjustment methodological issues and evaluate alternative approaches using claims from 1.6 million Medicare beneficiaries in 60 representative communities. Two key casemix adjustment methods - controlling for patient conditions obtained from diagnoses on claims and expenditures of those at the end of life - were evaluated. We failed to find evidence of bias in the former approach attributable to area differences in physician diagnostic patterns, as others have found, and found that the assumption underpinning the latter approach - that persons close to death are equally sick across areas - cannot be supported. Diagnosis-based approaches are more appropriate when current rather than prior year diagnoses are used. Population health likely explains more than 75% to 85% of cost variations across fixed sets of areas.

Original languageEnglish (US)
Pages (from-to)542-563
Number of pages22
JournalMedical Care Research and Review
Volume70
Issue number5
DOIs
StatePublished - Oct 2013

Keywords

  • casemix adjustment
  • geographic variations
  • Medicare costs
  • risk adjustment

ASJC Scopus subject areas

  • Health Policy

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