In a recent WSJ op-ed, Peter Orszag once again called for the elimination of “unexplained variation” as a means of decreasing health care spending. This time he zeroed in on Milwaukee, which I actually know something about, having not only grown up there but returned to many tears later as dean of the medical school. Orszag cited the fact that knee replacements are much more frequent in Milwaukee than in Manhattan, and he’s right. But a close look at the data (see the accompanying map) shows that Milwaukee’s greater use of knee replacements is not because nefarious doctors are bilking the system and that 30% of health care spending could be saved by stopping such waste, as Orszag would have us believe. The reason is that Milwaukee is within a cluster of states with high rates. They extend from Idaho to Michigan and from Kansas to North Dakota, but they don’t stop there. High rates continue into Saskatchewan, which sits atop North Dakota and has the same high rates, and into Ontario, which sits above Michigan and shares Michigan’s high rates. Knee replacement rates in these states and provinces average 70% higher than in regions with the lowest rates, which are in three clusters: California/Nevada/New Mexico + Hawaii; Kentucky/Tennessee; and New York/New Jersey/New England, and these low rates extend straight up from New England in to Quebec, Newfoundland and Labrador. The rates are as different in Quebec and Saskatchewan as they are in Massachusetts and Montana. How interesting that two neighboring countries with two different health care systems have identical patterns of geographic variation — a phenomenon that knows no borders. (Note that because the rates are lower among blacks, the map only shows rates for whites. These data are available from the CDC and the Canadian Institute of Health Information.)

Although it is difficult to explain this phenomenon, variation in knee replacements doesn’t appear to reflect some wasteful practice patterns. Rather, it’s more likely related to some cultural of environmental factors that span the US and Canada. From a health policy perspective, this is yet one more example of the fact that “unexplained variation” can usually be explained, and the explanations are usually related to the nature of the patients and their diseases and not to the practices of the physician who are caring for them. But where did this misunderstanding of knee surgery come from? Straight from the Dartmouth group. Here’s what John Wennberg (group leader) had to say about the wide geographic variation in knee replacement surgery and its persistence of over time: “What mattered most in predicting the rates in 2000–01 was the rates in 1992–93. In other words, the “surgical signatures” of regions are remarkably stable over time. Left alone, practice variations do not go away. Intervention is needed at the level of the doctor-patient relationship to reduce the role of medical opinion and enhance the role of the patient in choice of treatments.” Why “surgical signatures” rather than the usual “supplier-sensitive services”? Because there’s no correlation between knee surgery and the supply of surgeons, so it’s just that surgeons remember to do too many! Surely someone at Dartmouth must have noticed that the high and persistent rates were all in the plains and upper-Midwest, where Medicare spending is lowest, and it must have occurred to someone to ask if the durability of these rates was related to some durable characteristic of the population rather than to persistently wasteful physicians.

In his column in the NYT the same day as Orszag’s op-ed piece, David Brooks reminded us that health care has become “the bank” out of which President Obama plans to fund the bulk of his agenda. “By squeezing inefficiencies out of the health care system, he could have his New New Deal and also restore the nation to long-term fiscal balance.” The inefficiencies that the President talks about are Orszag’s 30% solution – which is based on getting rid of regional variation in physician practices, like knee replacements in Milwaukee. But durable solutions to health care reform will rest on critical analyses of health care data and reasonable expectations of what can be saved through system modifications. The current misperceptions and exaggerations by OMB are jeopardizing that goal.