The quiet of an Easter evening was shattered by a phone call from an irate surgeon saying, “did you see Peter Orszag’s Congressional testimony last year and the one by Elmendorf (his acting replacement at the Congressional Budget Office-CBO) last month?” Yes, I had seen both – they’re fundamentally the same. Both cite a 2002 paper from the Dartmouth group claiming that less than 30% of the variation in health care spending among regions is accounted for by differences in illness rates, and differences in income explain little more.
Their “poster child” for this statement is a study comparing Grand Junction, Colorado, one of the healthiest regions, and Birmingham, Alabama, one of the least healthy. By the Dartmouth group’s measure, the prevalence of heart disease, stroke and a number of other major illnesses is 55% higher in Birmingham than Grand Junction (although heart disease and stroke rates are actually double). And hospital and ICU days were right in line with this increased burden of illness: 48% more days and 38% more ICU days, so it’s not clear what the problem is. It looks as though disease burden more than explains the variation.
But there are a few other rather important differences between Birmingham and Grand Junction. Birmingham’s poverty rate is 25%, which is more than double that of Grand Junction, and 76% of Birmingham’s population is black, compared to 0.6% in Grand Junction. And contrary to the CBO’s testimony that “income explain little,” income explains everything. Individuals in the lowest 15% of income utilize twice as much health care as those with higher income.
In fact, if Alabama had the resources to provide all of the needed care to its citizens, utilization should not simply have been 38-48% greater in Birmingham, in line with its higher illness levels. It should have been 100% more, based on the combination of illness levels and poverty. And that’s exactly what is seen in northern communities, where poor populations with high burdens of disease inhabit urban ghettoes. But, unlike the circumstance in Alabama, these patients have access to facilities and resources that are established by the greater affluence of northerncommunities, and it is reflected in spending.
The lesson is that illness maters. And poverty matters. And whether or not zones of poverty are embedded in regions of affluence matters. And together these factors explain most of the regional variation that the Dartmouth group and the CBO seem to have so much difficulty explaining. Which would not be a problem except for the fact that they are converting confusion over regional variation into confused health policy.