Schafer: Tracking health spending by location gets tricky, but it’s telling

We have long known that spending on health care can vary a lot depending on where you live in the United States, which would be pretty hard to explain even if a lot of the bills weren’t getting paid by the same customer, the federal government.

How long people live varies a lot by region, too. What makes these two observations interesting to economists is that the relationship you would expect — more spending on health care going hand-in-hand with a longer and healthier life — doesn’t hold up at all.

Health economist Amy Finkelstein, in Minneapolis last week to deliver the dinner speech at the Minneapolis Federal Reserve Bank’s latest Opportunity & Inclusive Growth conference, said it was just a coincidence that Minneapolis was mentioned both in her research work and in her talk here.

We just happen to be the way she frames the best question: Why is it we spend half as much on health care in the Twin Cities compared with Miami? Is it us? Or is it something about where we live, like maybe our health system here?

Hate to give away the answer right away, but if you guess “both,” you are awfully close.

Finkelstein, of the Massachusetts Institute of Technology, was an academic star long before she was named a MacArthur Fellow earlier this month, one of 25 so-called genius grant winners this year. And just a couple of minutes into her nearly hourlong presentation here, it became obvious why this kind of research really matters.

If big differences in health spending were only about differences in people, maybe if they had much healthier lifestyle habits in low-cost areas of the country and didn’t need to see the doctor as often, then policymakers would know what to work on. Maybe, for example, in high-cost areas they would invest in programs to help people manage chronic problems like diabetes.

On the other hand, if the spending difference seems to be all about the place, maybe with much higher spending in communities with for-profit health care systems run by people hellbent on making a lot of money, then that presents a completely different problem.

Finkelstein’s appearance fit nicely with others invited to this Fed conference. If there was a theme, it was that where you live in this country really matters. It matters in how much you get paid for doing the same work, how likely you are to go to college, whether you might need some sort of license to work in another state or whether you will earn more money than your parents.

Finkelstein didn’t focus her research on Minnesota and Florida, by the way, but health researchers have long noted that there’s a chasm between what gets spent on health care here vs. greater Miami. For Medicare enrollees in the Twin Cities, we spend not much more than half as much as gets spent in Miami — about $7,800 here, on average for 2010, vs. more than $14,400 in South Florida. And Minnesotans are not dying any sooner because of scrimping on health care.

Minnesota now tops the list of states in what’s called healthy life expectancy, meaning not just still alive but generally healthy and free of disabling conditions. In only one other state besides sunny Minnesota, the state of Hawaii, does the healthy expected life span extend past 70 years, according to a recent study published by the American Medical Association.

Other research has found, Finkelstein said, that big differences in health and mortality seem to be explained by differences in the people, things like the rate of cigarette smoking. Big differences in health care spending, on the other hand, seem to be place-specific, likely just doctors and other providers delivering care in different ways.

The big idea of Finkelstein and her research partners in trying to get a better understanding of this was to skip comparing Floridians with Minnesotans or Texans. Instead they looked closely at the very same people. That meant they analyzed the health and health care utilization of people on Medicare before and after they picked up and moved from one place to another.

Older people moving across the country are not exactly rare, maybe after the death of a spouse or retirement from work. Declining health could be a factor, too, maybe leading someone to move closer to adult children who can help take care of them.

If their health habits don’t change at all after a move, and they still go to the doctor at about the same rate and take the same medications, then the place — the health care system, culture, whatever — must not matter much. You would have to conclude that big differences in health care spending between regions are all about the health and habits of the people there.

If their health behavior changes a lot, on the other hand, that has to be due to something about living in a new place.

You already know it’s both. As she put it, “we estimate that about 40 to 50 percent of that geographic variation in health care spending is due to the patient, and 50 to 60 percent is due to the place.” And the No. 1 factor in the differences attributed to the patient seemed to be changes in the person’s underlying health.

A lot more work lies ahead, she said, including getting “inside the black box of place” in an effort to identify what’s really happening that’s different in different places. One way she and her colleagues plan to do that is to once again track people who move — but this time the doctors, analyzing their work before and after they go to practice somewhere else.

Finkelstein was presenting to a room of Fed officials and economists, and even though she had a plain-speaking style, much of what she presented was in language just over the head of an untrained layman.

But nothing she said made the idea of moving to a place like South Florida after retirement sound any closer to a good idea.

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