Geographic Variation in Medicare Services

Abstract

At the request of members of Congress, the Institute of Medicine (IOM) convened a committee to examine geographic variation in Medicare expenditures for the services of hospitals, physicians, and other health care providers. In particular, the committee was asked whether Medicare should modify payments to adjust for the value of services delivered in a region by using a value index. Such an index would account for both the health benefit obtained from delivered services and their cost. Payment rates would then be raised in areas where benefits were high relative to Medicare spending and lowered where benefits were low. The committee, which we chaired, commissioned analyses of geographic differences in Medicare payments and has just issued an interim report summarizing and interpreting the findings.¹ Its full report, due later this year, will also report results of analyses of geographic differences in payments from commercial insurers.