The IOM committee is engaged in an ongoing, congressionally
mandated study of regional variations in health care spending, use and the
benefits of adopting a geographic value index. A value index would raise payment
rates in low-cost regions where the quality of care and health benefits are
high and decrease payments in high-cost areas where the quality and benefits
are low relative to their spending.
Medicare spending varies greatly across the country, even
after adjusting for regional price differences.
Studies indicate that regions where Medicare spends more do not
consistently report better health outcomes or greater patient
satisfaction. However, committee members noted that using a
geographically based value index to set reimbursements could reward low-performing
providers in high-performing regions and penalize high-performing providers in
“The effectiveness of payment reforms in reducing
overutilization while maintaining access to high-quality care depends on the
effectiveness of targeting. We found that there was substantial local variation
in health care utilization and spending within broad regions,” said Yuting Zhang,
Ph.D., an associate professor of health economics at Pitt Public Health and
the author of one of the subcontractor reports for the IOM committee.
“In the U.S., regions don’t have decision-making authority,”
Barnato, M.D., Pitt School of Medicine and IOM committee member. “That’s not true in other countries, like
Canada and England, where budgets are managed regionally. In those places
regional budget caps are used to equitably distribute money across the country,
leaving the regional decision makers to determine how to pay the providers
within their region. The closest organizational equivalent we have in the U.S.
for fee-for-service Medicare is an accountable care organization – and those
are very new.”
The IOM committee expects to release its final report this
summer, which will include further analysis and conclusions.