The Implications of Variations in Medicare Spending for Health Care Reform

Thank you Mr. Chairman and distinguished members of the Committee for the invitation to address you today. Rapidly rising health care costs pose a serious threat not only to the future of public and private health insurance coverage but also to the sustainability of efforts to expand coverage to the nearly 50 million uninsured Americans. Many policy experts have concluded that excessive growth in health care spending is a foregone conclusion, driven by inexorable forces. Most blame advancing technology. And some conclude that only by rationing beneficial care will the U.S. be able to achieve a sustainable and affordable future. Data recently released by the Dartmouth Atlas Project call each of these assertions into question. Figure 1, reprinted from a recent commentary we wrote in the New England Journal of Medicine 1, shows average age-, sex-, and race-adjusted per-capita Medicare spending in five U.S. hospital-referral regions over the past 15 years. During this period, overall Medicare spending, adjusted for general price inflation, rose by 3.5% annually. But there was marked variation across regions. Per-capita inflation-adjuste