Medicare Drug Spending Varies Widely Across U.S.
WEDNESDAY June 9, 2010 -- Medicare patients in some regions of the United States spend significantly more on drugs than older folks elsewhere in the country, a new report finds.
But higher drug spending doesn't mean they spend less on doctor visits or hospitalizations, the researchers say.
"Our findings reinforce the importance of understanding the drivers of geographic variation, since increases in medical spending or pharmaceutical spending do not appear to be associated with offsetting savings in the other realms," said lead researcher Yuting Zhang, an assistant professor of health economics at the University of Pittsburgh Graduate School of Public Health.
"Spending on pharmaceuticals itself is variable and thus warrants scrutiny similar to that given to medical spending in order to glean lessons about optimal prescribing, insurance characteristics, and resource allocation," she added.
The report is published online June 9 in the New England Journal of Medicine.
For the study, Zhang's team looked at spending on drugs and other medical services among Medicare patients in 2007 at 306 hospital-referral regions across the country.
"Widespread geographic variations exist, with some regions spending almost twice as much as others," Zhang said.
As part of their calculations, the researchers considered factors such as differences in costs, insurance and overall health in the different geographic areas.
Overall, drugs accounted for more than 20 percent of total medical costs, but the researchers found substantial regional variations in drug spending.
Manhattan, in New York City, had the highest Medicare spending on drugs at $2,973 per patient a year, while Hudson, Fla., had the lowest at $1,854, the investigators found.
Los Angeles, Montana, Alaska and Hawaii were other areas of high drug spending by Medicare beneficiaries, while regions of low spending include parts of Arizona, New Mexico, Oregon and Maine, according to the report.
Spending on non-drug health care also varied by region, with some regions spending twice as much as the lowest, the group found.
These differences in other health care services were only weakly associated with spending on drugs. "The areas where drug spending is the highest have neither systematically higher-than-average nor lower-than-average non-drug medical spending," Zhang said.
Health conditions that require patients have both drugs and frequent doctor visits might be one explanation for the discrepancy, Zhang said.
Regional differences in spending might also be caused by various non-medical factors, she said.
"It is possible that more affluent people might be less sensitive to price, so they tend to use more brand-name drugs, even though generics are available," Zhang said. "Physicians from different regions might have different prescribing habits, or some plans or states might have stricter regulations regarding step therapy or prior authorization, like using preferred and cheaper drugs first before using more expensive non-preferred drugs."
Joseph P. Newhouse, professor of health policy and management at Harvard University and report co-author, attributes the variations in drug spending to prices and prescribing habits.
"In the higher-spending drug regions, doctors are prescribing more drugs and more expensive drugs," Newhouse said.
But the impact on health isn't clear, he said. "We don't know if the low regions are under-prescribing and the high regions are over-prescribing or both, so we can't say," Newhouse said.
The next step is to determine what differences exist in terms of patient outcomes, he added.
Joe Baker, president of the Medicare Rights Center, a consumer service organization, said the study highlights the need to develop "health care standards that are nationwide."
A lot of medicine is "local, like politics," Baker said. "Doctors get into certain practice patterns in a certain locality, and that is driven by medical societies and other community organizations doctors work in and not necessarily broader-based quality or practice standards," he said.
"We need to find out whether doctors are using 'best practices' to prescribe drugs, or are they just doing it willy-nilly," he said.
For more information on Medicare, visit the Medicare Rights Center.
Posted: June 2010