Variations in Medicare Spending: Guess What? It's Complicated AND a Mystery

Two studies* have now documented that Medicare spending per beneficiary varies widely on the basis of geographic location. The latest study, published in today's NEJM, indicates a difference of up to 52% between the highest- and lowest-spending areas in the United States. But reasons for a big portion of this spending difference remain a mystery.

While the authors conclude that some regionally based differences in Medicare spending per beneficiary can be explained by baseline health and demographic characteristics (like age, sex, and race), explanations for 60% of the spending difference are unknown. The researchers speculate that differences in Medicare spending might be influenced by a number of factors, including what boils down to fraudulent Medicare billing (eg, "providers' profit-seeking behavior" and "rates of inappropriate Medicare payment").

My own view, given a recent hospitalization, is that rampant billing fraud by in-hospital physicians (whether targeting Medicare, insurance companies, or patients) plays a substantial role. If my experience is any indication, it seems the rule,** rather than the exception, for physicians to greatly exaggerate their services—both in terms of level of care provided and time spent. Unfortunately this type of billing fraud is difficult, if not impossible, to detect, unless a very granular survey of physician billing can be compared with a reliable account of services actually rendered. And a reliable account probably requires the input of an unusually savvy patient—like a hospitalized physician.

* The first is Sutherland et al. NEJM. 2009;361:1227-1230.

** At least in my neck of the woods.