Those who think regional variation in Medicare spending is driven by something other than overutilization may be changing their tune after reading the conclusions of a study printed last week in Health Affairs.  Cost of living has been offered as a major reason why some places spend so much more on Medicare patients than others.  The study, by Dartmouth researchers, debunks that theory:

Per capita Medicare spending is more than twice as high in New York City and Miami than in places like Salem, Oregon. How much of these differences can be explained by Medicare’s paying more to compensate for the higher cost of goods and services in such areas? To answer this question, we analyzed Medicare spending after adjusting for local price differences in 306 Hospital Referral Regions. The price-adjustment analysis resulted in less variation in what Medicare pays regionally, but not much. The findings suggest that utilization—not local price differences—drives Medicare regional payment variations, along with special payments for medical education and care for the poor.

The adjustment did make a significant difference for some parts of the country, primarily in large cities.  But even after the adjustment, those areas still spent much more than not only low-cost locations like Iowa City and Dubuque, but even comparable metropolitan areas like San Francisco and Alameda County in California (see tables below).

HRR number	HRR name	Per capita spending	Price-adjusted per capita spending	Percentage difference
10 HRRs with highest price-adjusted per capita Medicare spending
127	FL—Miami	$15,909	$14,966	6%
402	TX—McAllen	13,633	13,881	–2
297	NY—Bronx	12,004	8,653	39
303	NY—Manhattan	11,744	8,861	33
396	TX—Harlingen	11,489	11,324	1
56	CA—Los Angeles	10,674	9,325	14
301	NY—East Long Island	10,608	8,740	21
233	MI—Dearborn	10,460	9,791	7
217	LA—Monroe	10,226	11,385	–10
234	MI—Detroit	9,954	9,541	4
10 HRRs with lowest price-adjusted per capita spending
324	ND—Minot	6,033	6,711	–10
428	VA—Lynchburg	6,022	6,524	–8
105	CO—Grand Junction	5,983	6,075	–2
342	OR—Eugene	5,968	5,798	3
194	IA—Iowa City	5,902	6,254	–6
370	SD—Rapid City	5,854	6,176	–5
345	OR—Salem	5,810	5,642	3
193	IA—Dubuque	5,799	6,219	–7
448	WI—La Crosse	5,715	5,757	–1
150	HI—Honolulu	5,293	5,212	2
5 HRRs with highest percentage difference between price-adjusted and non-price-unadjusted spending
297	NY—Bronx	12,004	8,653	39
303	NY—Manhattan	11,744	8,861	33
65	CA—Alameda County	9,251	7,094	30
81	CA—San Francisco	8,140	6,278	30
85	CA—San Mateo County	7,878	6,104	29
5 HRRs with lowest percentage difference between price-adjusted and non-price-unadjusted spending
208	KY—Paducah	7,626	8,680	–12
260	MS—Meridian	8,208	9,371	–12
321	ND—Bismarck	6,152	7,053	–13
2	AL—Dothan	7,543	8,703	–13
6	AL—Mobile	7,759	8,990	–14