The particulars of health care policy can build a steep learning curve, but there is one tidbit of information that IHA and our hospitals have done a good job of communicating – the fact that, on a per-beneficiary basis, Medicare spends less in Iowa than just about any other state in the union.  This is well known in Iowa and among our Congressional Delegation, but it hasn’t garnered much attention in the media – until now.

The New York Times has published a story focused on the geographic spending disparities within the Medicare program, the central point being that Medicare spends much more money in some parts of the country than in others with no real benefit to patients.  In Iowa, for example, the cost in 2006 was $6,572 per beneficiary, while in New York it was $9,564.  Even more startling is the fact that per-beneficiary costs within states can be even more extreme and inexplicable; in Miami, the cost is more than $16,000 per beneficiary, while the Florida average is a not-quite-as-outrageous $9,379.

All of this has captured the attention of Washington in general and the White House in particular, as the Times points out:

President Obama recently summoned aides to the Oval Office to discuss a magazine article investigating why the border town of McAllen, Texas, was the country’s most expensive place for health care.  The article became required reading in the White House, with Mr. Obama even citing it at a meeting last week with two dozen Democratic senators.

“He came into the meeting with that article having affected his thinking dramatically,” said Senator Ron Wyden, Democrat of Oregon. “He, in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’ ”

More spending does not provide better results

This would all be academic if Medicare enrollees were somehow benefiting from living in these high-spending areas, but research has shown otherwise.

For years, scientists at the Dartmouth Atlas of Healthcare have collected and analyzed the data and concluded that more spending does not provide better results.  Certainly, it doesn’t mean higher quality of life, because more spending means patients are subjected to more visits to the hospital, more consultations with different specialists and more testing.

Still, there are those who would cloud this conclusion by arguing that the extra spending has some kind of benefit, as the Times found in the person of Massachusetts Senator John Kerry, who said:

“States like Massachusetts are concentrated centers of medical innovation where cutting-edge treatments are tested and some of the nation’s finest doctors are trained…This work might cost a little more, but it benefits the entire country.”

When compared to Iowa, that “little more” is $2,800 per year for each of Massachusetts’ 1 million Medicare beneficiaries – enough to cover 85 percent of the entire cost of Medicare in Iowa.  And even if Kerry’s explanation holds true for “cutting-edge” states like Massachusetts, what is his explanation for Louisiana, which spends even more, or Minnesota, home to the renowned Mayo Clinic, which spends almost as little as Iowa?

Why does this matter?  Well, for one thing, it means taxpayers in low-cost states are subsidizing the wasteful spending habits of high-cost states.

But in the context of health care reform, the larger issue is saving money by reforming the way Medicare pays physicians and hospitals.  As we’ve noted before, Medicare pays for volume, not value.  The more care that is provided, the more Medicare pays, with no regard to the quality of that care.

Hospitals support an approach that rewards value

Iowa’s hospitals want Medicare to take an approach that, while certainly more sophisticated and subjective, is simply prioritizing what every consumer prioritizes in the marketplace – real value.  Such an approach would save Medicare billions of dollars.

You can read the particulars in IHA’s position paper that supports the currently proposed concept of value-based purchasing in the Medicare program.