Using Medicare Data to Understand Growth in US Healthcare Costs

Researchers from the Dartmouth Atlas Project suggest that regional variations in per capita Medicare spending provide important clues for how to more efficiently deliver healthcare throughout the United States, such that Medicare could shift from being insolvent (as projected) to being solvent by 2023.

With healthcare reform next on President Obama’s To Do list, the big question – after what it will look like – is how much it will cost. Julie P. Bynum, MD, MPH, along with Elliot S. Fisher, MD, MPH and Jonathon S Skinner, PhD from the Dartmouth Atlas Project, describe some ways that the growth rate – rather than the actual costs — of US healthcare can be controlled, to “bend the cost curve.”

As Dr Bynum explains, it’s not just a matter of absolute dollars and cents: “A lot of people focus on cost and cutting cost, and we were trying to focus on growth.”

The Dartmouth Atlas Project data show that overall Medicare spending (adjusted for general price inflation) rose by 3.5% annually, from 1992 to 2006. The annual growth rate for Salem, OR was lower than the national average (2.3%) while in Miami, FL the growth rate was 5%, yet Miami had some of the highest total per capita spending. The highest growth rate nationwide was in McAllen, TX (8.3%), compared with Honolulu, HI, which boasted the lowest growth rate (1.6%).

Data are from the Dartmouth Atlas Project, presented in Fisher ES, et al. New Engl J Med. 2009; 360: 849-852.    

How much does a few percentage points matter? According to their calculations, if annual spending growth was reduced from 3.5% to 2.4% (the rate in San Francisco), Medicare would be in the black by US$758 billion, instead of in the red (as currently projected) by $660 billion by 2023 – a cumulative savings of US$1.42 trillion dollars.

Why do these differences in growth rates exist? That’s the million – or trillion – dollar question and it most likely has many answers.

As Dr Bynum explains, “people have been very nihilistic about the costs in healthcare and about healthcare cost growth, attributing it to technology and saying if we want the best technology in medicine, we just have to absorb the cost. What we tried to show was, in fact, cost growth … is not inevitable…No one would argue that people in San Francisco are getting less of the technological care than people in Miami but their growth rates are remarkably different. So it’s really a message of hope. It can be done differently because it is being done differently.”

We’ll be talking with Dr Bynum and others about what some of these different healthcare delivery strategies look like.