Report: Geographic Medicare Spending Gaps May Be Due to Waste, Overuse

A study by the Institute of Medicine examining geographic differences in Medicare spending found the variations may be due to waste or unnecessary procedures, but cautioned policy makers against cutting rates to high-cost regions.

The report, authored by the IOM's Board on Health Care Services and titled "Geographic Variation in Health Care Spending and Promotion of High-Value Care – Interim Report," analyzed three decades of research into spending differences in 306 hospital-referral regions. Researchers found wide Medicare spending disparities between and even within regions that couldn't be attributed to residents' age or health status.

Wasteful spending or unnecessary services could be the cause, which could lead some policy makers to recommend that CMS cut payment rates to regions on which it spends a disproportionate amount of Medicare dollars, so that these providers would be driven to lower costs. However, the authors of the study warned that blanket cuts to high-spending regions could penalize quality care and thrifty decision-making by some providers.

Rather, the authors stated payment adjustment programs for specific high-cost providers may be more effective at lowering costs and waste instead of geographic-based payment reductions.

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