What is the relationship between quality of care and Medicare spending?

States with higher spending per Medicare beneficiary tended to rank lower on 22 indicators of the quality of care. This inverse relationship might reflect medical practice patterns that favor intensive, costly care rather than the effective care measured by these indicators.

Why is this important?

The quality of care delivered to Medicare beneficiaries varies widely by state. The Medicare Quality Improvement Organization program currently measures the effectiveness of care for several indicators such as the administration of beta blockers following a heart attack, mammograms for older women, influenza vaccines, and eye exams for diabetics. These evidence-based practices are beneficial, relatively inexpensive, and (with some exceptions) rarely contraindicated.

Findings

A national study found that states with higher Medicare fee-for-service spending tend to deliver lower quality care to Medicare fee-for-service beneficiaries, as assessed based on states' overall ranking across 22 quality indicators.

• For every 11,000 increase in Medicare spending per beneficiary, a state's quality ranking dropped 10 positions (this inverse relationship between spending and quality is represented by the solid line on the graph).
• Higher spending was associated with greater use of hospital resources but was not associated with higher patient satisfaction (not shown) (Baicker and Chandra 2004).

Implications

The authors state that this study "clearly does not suggest that we mandate lower spending, because it is probably not spending per se that reduces quality" (Baicker and Chandra 2004). The composition of the medical workforce accounted for almost half of the state-level variation in Medicare spending per beneficiary. States with a higher proportion of primary care practitioners (versus specialists) exhibited better performance on these quality indicators and lower costs per beneficiary. Hence, specialists may be clustered in areas where costly care "crowds out" the kinds of effective care measured by this study.

Improvement Ideas and Resources

The study authors suggested that possible interventions could focus on promoting greater access to primary care clinicians and or involving specialists in the provision of more effective care.

Measure:

This study used states' overall rankings on 22 indicators of the quality of care as measured by the Medicare Quality Improvement Organization (QIO) program for Medicare fee-for-service beneficiaries during 2000–2001. Detailed risk adjustment has not been found critical when using such process-of-care measures for population based analyses. Medicare fee-for-service claims data were used to calculate Medicare spending per beneficiary at the state level. Spending was adjusted for inflation, differences in state price levels, and the age, sex, and race of each state's Medicare population. Determinants of state spending and quality were examined using generalized least squares regression weighted by the size of the Medicare population in each state. Increased state spending was associated with statistically significant reductions in rates for 15 of the 24 QIO indicators (Baicker and Chandra 2004).

Limitations:

The 22 indicators used in the study do not capture all aspects of high-quality care. Expanding this type of analysis to include a broader array of representative quality measures would provide a fuller understanding of the relationship between the costs and quality of health care.

Source:

The analysis was conducted by researchers at Dartmouth Medical School (Baicker and Chandra 2004).

References:

* Indicates source of data used in the chart(s).

* Baicker, K. and A. Chandra. 2004 Medicare Spending, the Physician Workforce, and Beneficiaries' Quality of Care. Health Affairs Web Exclusive: W184–97.