Variation: Study Suggests Cost Based on Illness More than Delivery System

Today’s Managing Health Care Costs Quote:

Insurance is expensive because it's paying for medical care, and it won't be affordable unless the medical care it's paying for becomes affordable.”
Ezra Klein  , January 28, 2011

There’s another volley in the ongoing academic food fight about how much provider variation affects variation in health care costs, and how much of variation is about how sick patients are.

The Center for the Study of Health System Change  has just circularized an article published last week in Health Services Research  which looked at a year of claims data from 1.6 million Medicare beneficiaries in communities where the Community Tracking Survey collected independent information about providers.  High cost beneficiaries cost $48,000, while low cost beneficiaries (top and bottom quintile) cost $7000. 

The high cost beneficiaries were older, more likely to be eligible for both Medicare and Medicaid, and had more diseases.    They were more likely to get health care in multiple census districts, and more likely to have a specialist as their usual source of care.  However, they were not more likely to live in areas with higher hospital, physician or specialist supply.

This is a complicated study of Medicare beneficiaries only, and includes scads of statistical manipulation and adjustments.  It’s not proof that supply has no impact on resource cost. However, I believe this is another indication that we can’t expect to solve the health care cost crisis by profiling providers and controlling capital expense alone. 

We’ll need to make real and difficult change in the actual delivery of care to genuinely sick people to get the cost savings we need.