Medicare spending is concentrated among a few high-cost beneficiaries who are often targeted by cost-saving interventions. Data on Medicare spending are claims-based and adjusted for price, age, sex, and race (20% sample for 2003-2009, 100% sample for 2010-2013). Rapidly rising healthcare costs pose a serious threat not only to the future of public and private health insurance coverage, but also to the sustainability of efforts to expand coverage to the millions of uninsured Americans. Many policy experts have concluded that excessive growth in health care spending is a foregone conclusion, driven by inexorable forces such as advancing technology. Some conclude that only by rationing beneficial care will the U.S. be able to achieve a sustainable and affordable future.
Neither of these conclusions is inevitable. Both rest on the assumption that all of the additional spending in high spending regions areas is buying services that are necessary and beneficial. However, studies comparing similar patients have found that those in higher-spending regions are more likely to be admitted to the hospital, spend more time in the hospital, receive more discretionary tests, see more medical specialists, and have many more different physicians involved in their care. The extra care does not produce better outcomes overall or result in better quality of care, whether one looks at measures of technical quality (such as providing appropriate medication to heart attack patients), or survival following such serious conditions as a heart attack or hip fracture. Higher spending also does not result in improved patient perceptions of the accessibility or quality of medical care. HSAs were defined by assigning ZIP codes to the hospital area where the greatest proportion of their Medicare residents were hospitalized. Minor adjustments were made to ensure geographic contiguity. This process resulted in 3,436 HSAs. When these regions were created in the early 1990s, most hospital service areas contained only one hospital. In the intervening years, hospital closures have left some HSAs with no hospital; these HSAs have been maintained as distinct areas in order to preserve the continuity of the database.
Slowing the rate of Medicare spending growth is both necessary and achievable. Taking steps now to limit future spending increases such as slowing the growth of capacity, developing better evidence on the risks and benefits of many common treatments (and countering the assumption that more medical care necessarily means better medical care), and reforming the payment system to reward the value, rather than volume, of care will result in better health care for those enrolled in Medicare and better fiscal health for Medicare itself.