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. 2021 Dec 10;2(12):e214122.
doi: 10.1001/jamahealthforum.2021.4122. eCollection 2021 Dec.

Geographic Variation in Medicare Fee-for-Service Health Care Expenditures Before and After the Passage of the Affordable Care Act

Neeraj Sood  1 , Zhiyou Yang  2 , Peter Huckfeldt  3 , José Escarce  4   5 , Ioana Popescu  4 , Teryl Nuckols  6
Affiliations

Geographic Variation in Medicare Fee-for-Service Health Care Expenditures Before and After the Passage of the Affordable Care Act

Neeraj Sood et al. JAMA Health Forum. .

Abstract

Importance: Geographic variation in Medicare spending is often used as a measure of wasteful spending. A 2013 Institute of Medicine report found that postacute care was a key contributor of geographic variation from 2007 to 2009. However, payment reforms and antifraud efforts implemented after the passage of the Affordable Care Act (ACA) may have reduced geographic variation in spending, especially postacute care spending.

Objective: To investigate how geographic variation in Medicare fee-for-service per-beneficiary spending changed from 2007 to 2018 before and after passage of the ACA.

Design setting and participants: This cross-sectional study included all fee-for-service Medicare enrollees 65 years or older from January 1, 2007, to December 31, 2018. The fee-for-service Medicare Geographic Variation Public Use File was used to group hospital referral regions (HRRs) in each year into deciles (10 equal groups) based on per-beneficiary total spending. The difference between the per-beneficiary monthly spending in each decile and the national mean, as well as the ratio of per-beneficiary total spending in the top deciles to that of the bottom decile, were reported. Data analysis occurred from July 22, 2019, to October 21, 2021.

Main outcomes and measures: Per-beneficiary spending on hospital inpatient, hospital outpatient, physician, and postacute care (and type of postacute care).

Results: There were 27.2 million fee-for-service beneficiaries in 2007 (58.0% women) and 28.3 million beneficiaries in 2018 (55.9% women). Per-beneficiary Medicare spending was $9691 in 2007 and $9847 in 2018 (using inflation-adjusted 2018 dollars). Geographic variation in Medicare spending was stable from 2007 to 2011 and then declined steadily from 2012 to 2018. The ratio of per-beneficiary total Medicare spending in the HRRs in the top decile to the bottom decile was 1.68 in 2007 ($415 monthly difference in spending) but only 1.56 ($361 monthly difference in spending) in 2018 (estimated change, -0.12 [95% CI, -0.21 to -0.02]; P = .01). Focusing on specific spending categories, the only statistically significant reductions in geographic variation were found for home health; the ratio of home health spending among HRRs in the top to bottom deciles of total Medicare spending fell from 5.14 in 2007 to 3.45 in 2018 (change, -1.69 [95% CI, -3.30 to -0.09]; P = .04).

Conclusions and relevance: Geographic variation in total per-beneficiary Medicare spending fell from 2007 to 2018, with home health spending being a key factor associated with geographic variation. The ACA's value-based payment programs and enhanced integrity efforts in home health provide a possible explanation for the decrease.

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Conflict of interest statement

Conflict of Interest Disclosures: Dr Sood reported receiving grants from the Agency for Health Research and Quality (AHRQ) during the conduct of the study. Dr Yang reported receiving support from grant R01HS025394 from the AHRQ during the conduct of the study while at the University of Minnesota. Dr Huckfeldt reported receiving grants from the AHRQ during the conduct of the study and serving as a consultant to the Urban Institute and the RAND Corporation on federally funded research projects relating to Medicare spending. Dr Escarce reported receiving grants from the AHRQ during the conduct of the study. Dr Popescu reported receiving grants from the AHRQ during the conduct of the study and receiving grants from National Heart, Lung, and Blood Institute outside the submitted work. Dr Nuckols reported receiving grants from the AHRQ during the conduct of the study and receiving grants from the National Institute on Aging, US Food and Drug Administration, National Center for Advancing Translational Sciences, National Institute on Drug Abuse, and National Heart, Lung, and Blood Institute outside the submitted work. No other disclosures were reported.

Figures

Figure 1.
Figure 1.. Health Care Expenditures in the Medicare Fee-for-Service System
All expenditures are price standardized to eliminate spending variation due to different local wages and input prices. All expenditures are inflated to 2018 US dollars based on the Consumer Price Index released by the US Bureau of Labor Statistics. Other services include hospice, federally qualified health centers/rural health centers, outpatient dialysis facilities, ambulatory surgery centers, ambulance, Part B drugs, other unspecified physicians, chiropractic, vision, hearing, speech, and other unclassified Part B services. aTotal spending: $265.17 billion. bTotal spending: $279.93 billion.
Figure 2.
Figure 2.. Difference Between Per-Beneficiary Monthly Health Care Expenditures in Each Decile of Hospital Referral Regions (HRRs) and the National Mean
All expenditures are price standardized to eliminate spending variation due to different local wages and input prices. All expenditures are inflated to 2018 US dollars based on the Consumer Price Index released by the US Bureau of Labor Statistics. Hospital referral regions are grouped into 10 similar groups based on total per-beneficiary health care expenditures. Decile 1 is the lowest-spending group; decile 10, the highest-spending group.
Figure 3.
Figure 3.. Difference in Medicare Postacute Care Per Capita Monthly Spending and National Mean by Hospital Referral Region (HRR) Deciles and Service Type
All expenditures are price standardized to eliminate spending variation due to different local wages and input prices. All expenditures are inflated to 2018 US dollars based on the Consumer Price Index released by the US Bureau of Labor Statistics. The HRRs are grouped in similar deciles based on total per-beneficiary health care expenditures. Decile 1 is the lowest-spending group; decile 10, the highest-spending group.
Figure 4.
Figure 4.. Ratio of Per-Beneficiary Medicare Spending by Total Spending Decile for Selected Categories
All expenditures are price standardized to eliminate spending variation due to different local wages and input prices. All expenditures are inflated to 2018 US dollars based on the Consumer Price Index released by the US Bureau of Labor Statistics. Hospital referral regions are grouped in similar deciles based on total per-beneficiary health care expenditures. Decile 1 is the lowest-spending group; decile 10, the highest-spending group. The pronounced spike in home health spending in decile 10 to decile 1 in 2009 is driven by high per capita expenditures in Miami, Florida; McAllen, Texas; and Harlingen, Texas.
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