Demographics, health risks drive geographic healthcare spending variance

As U.S. healthcare costs inflate, factors such as insurance status, demographics and increased patient health risk must be investigated when defining ways to realign healthcare spending, according to a report released by the American Hospital Association (AHA) this week.

The AHA report, which focused on the geographic variables of heathcare distributions, found that Maine has one of the lowest Medicare expenditures, yet has one of the highest on-average individual premiums. The AHA also found that individuals earning less than $25,000 paid more in healthcare costs than those with a median average income of $40,000.

The report found that factors such as race, income and health status, which are often disregarded in research, could create unintended consequences for providers and communities.

“The existence of spending variation implies an opportunity for cost savings or the realignment of spending in ways that reward efficiency, but realizing this opportunity hinges on the ability to identify more precisely the specific drivers of spending and to design targeted approaches to effect change,” the authors wrote.

Drivers that have a major influence on spending, according to the report, focus on two categories: spending rates (market structure, wages and graduate school education) and service utilization (population characteristics, provider dynamics and local practice environments).

In addition, Medicare and Medicaid cost distributions are said to be directly correlated with the U.S. geographic cost discrepancies due to the fact that allocations are calculated on a state-by-state basis, the report found. These costs vary in specific regions due to differences mainly in income, an increased presence of teaching colleges and rural spending costs that reflect on state priorities.

“Focus on geographic variation has intensified as policymakers struggle to identify strategies to contain costs. While the U.S. has regions with relatively high spending, there also are pockets of very low spending,” the report stated.

In addition, the AHA found that chronic illness and health risks are major factors that effected regional healthcare costs, according to the report. Predominantly, diseases such as diabetes, obesity and heart disease run most rampant in individuals who live in the southern region of the U.S, thus increasing healthcare costs considerably in that vicinity, the research found.

“Crafting policies that hold the appropriate stakeholders accountable but avoid a one-size-fits-all strategy” are important to increase the longevity of the U.S. healthcare system, the report said.

Policies that adapt spending levels and spending growth "are not well correlated," according to the authors. Research should further look at variables to eliminate unnecessary procedures and treatments and reduce costs, the report stated.