Orszag: The Death of Geographic Variation, the Birth of Uneven Distribution

November 2007New England Journal of Medicine: “Embedded in the country’s fiscal challenge is the opportunity to reduce costs without impairing overall health outcomes. Perhaps the most compelling evidence of that opportunity lies in substantial differences in health care spending and the fact that higher-spending regions do not have higher life expectancies or show significant improvement on other measures of health.”

 September 2008Stanford University:  “We’ve got these huge variations in the utilization intensity of health care practices that are absolutely astonishing, which suggests that there is radical inefficiency in our health care system. The most compelling evidence is the very substantial variation in health care costs we see in different parts of the United States which the Dartmouth group has not been able to explain based on underlying health characteristics of the patients in different areas. There is little evidence that the extra spending gets us anything in terms of reduced mortality or higher quality.”

December 2008CBO Report: “In sum, the evidence about variation in spending suggests that efficiency gains in the health care system are possible: Expenditures in high-spending regions could probably be lowered without producing worse outcomes, on average, or reducing the overall quality of care.”

May 2009Wall Street Journal: “Medicare enrollees in areas with higher spending do not appear to have better health outcomes on average than those in areas with lower spending. If we can move our nation toward the proven and successful practices adopted by lower-cost areas and hospitals, some economists believe health-care costs could be reduced by 30% — or about $700 billion a year — without compromising the quality of care.”

May 2009National Public Radio: “Estimates suggest that as much as $700 billion a year in health care costs do not improve health outcomes. It occurs because we pay for more care rather than better care.”

(And now the Wizard of Orszag does his Geographic Variation disappearing act. Watch….)

August 2010New England Journal of Medicine: “Yet ‘bending the curve’ of health care inflation also requires a more direct challenge in the way that health care is delivered. Health care costs are unevenly distributed: 10% of patients account for 64% of costs. Sustained cost control will occur only with more coordinated care that prevents avoidable complications.”

To the Wizard of Orszag: Poverty explained geographic variation, so it’s no longer “unexplained,” and poverty accounts much of the uneven distribution of costs. Health care cannot be reformed without addressing P-O-V-E-R-T-Y.


  1. Mark Foster

    Please see “The Relative Health Burden of Selected Social and Behavioral Risk Factors in the United States: Implications for Policy”, Muennig, et al, American Journal of Public Health, September 2010, Volume 100, No. 9 for another analysis of health risks that suggests poverty remains a dominant health risk in the U.S.

    • buzcooper

      This important paper concluded “We found that living at less than 200% of the federal poverty level reduced quality adjusted life expectancy more than any other risk factor, even after we controlled for effects of education.” In accord with these findings, we have found that poverty is the single most important factor leading to greater health care spending, and since poverty is geographic, it is the most important factor contributing to regional variation in health care.

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