Medicare Spending

Rapidly rising health care 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.

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.




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The Dartmouth Atlas of Health Care is based at The Dartmouth Institute for Health Policy and Clinical Practice and is supported by a coalition of funders led by the Robert Wood Johnson Foundation, including the WellPoint Foundation, the United Health Foundation, the California HealthCare Foundation, and the Charles H. Hood Foundation.