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Study spoils common wisdom on health spending

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The Thomson Reuters study that showed Anderson as the highest-spending health care market in the nation also throws a wrench in what was a widely accepted conclusion in health care policy.

That conclusion is that the levels of health care treatment and spending vary widely from one locale to another with no clear reason based on demographics or health outcomes. The idea was first advanced in 1973 by Dr. Jack Wennberg’s analysis of Medicare data from across the country and is now formalized in the Dartmouth Atlas of Health Care.

The Dartmouth research burst into public view during the 2009 health reform debate, when President Obama and his then-budget director Peter Orszag used it to argue that the wide variation in spending was unnecessary and could be eliminated—shaving about 30 percent off the nation’s annual health tab—without diminishing the quality of care one bit.

Also that year, The New Yorker magazine ran an article by Harvard physician Atul Gawande that compared McAllen, Texas—identified by the Dartmouth Atlas as the highest-spending market in the nation—with nearby El Paso. Gawande found no health advantages in McAllen, even though the level of Medicare spending there was far higher than in El Paso. He concluded that cultural factors among the medical community in McAllen were needlessly driving up spending.

But the Thomson Reuters study, which uses data from employer-sponsored health plans instead of Medicare, throws that conclusion into doubt. That’s because McAllen is one of the lowest-spending markets for commercial health insurers.

Residents there spent less than $3,000 per person, compared with spending in the Anderson area of more than $7,200 per person.

“The reason for these differences must be understood to generate effective policies that use resources effectively without compromising health care quality,” wrote the authors of the Thomson Reuters study, which is based on the market research company’s database of claims data from employer health plans and some health insurers.

Interestingly, Anderson is not one of the highest spending areas for Medicare, according to a 2009 analysis of Dartmouth Atlas data by Better Healthcare for Indiana, a not-for-profit group promoting community-based efforts to improve health and health care.

It found that Anderson’s seniors on Medicare spent about $7,200 per year on health care, which was actually lower than spending in Indianapolis and the state as a whole. Those regions tend to be about at the national average.

And even among seniors with commercial health insurance—typically Medicare supplement policies—seniors in Anderson spend less than the national average: about 97 percent of it, according to Thomson Reuters findings.

Meanwhile, health care spending in McAllen, Texas, by seniors with commercial health insurance was about 30 percent higher than the national average.

Some have speculated that doctors and hospitals that derive less revenue from private health insurers may engage in aggressive treatment of seniors in order to boost their revenue from Medicare. But Les Zwirn, executive director of Better Healthcare for Indiana, said it’s unreasonable to assume doctors change their habits that drastically from one patient type to another.

“It’s a mystery,” Zwirn said of the discrepancy between the Dartmouth Atlas and the Thomson Reuters study.

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