Measuring Regional Variation in Service Use (PDF; 564 KB)
Source: Medicare Payment Advisory Commission

In this paper, we present data on the difference between regional variation in Medicare spending and regional variation in the use of Medicare-covered services. Regional variation in Medicare spending per beneficiary reflects many factors, including differences in beneficiaries’ health status, Medicare payment rates, service volume (number of services), and service intensity (e.g., MRI versus simple X-ray). In contrast, regional variation in the use of Medicare services reflects only differences in the volume and intensity of services that beneficiaries with comparable health status receive. Although service use varies less than spending, the amount of services provided to beneficiaries with similar resource needs still varies substantially.
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In summary, we find:

• Regional variation in service use is not equivalent to regional variation in Medicare spending. The two should not be confused.
• Medicare spending varies in part because of the factors Medicare uses to account for differing wages and special circumstances, such as the wage index and health provider shortage area payments. We must adjust for those factors to arrive at service use, but the appropriate levels of those payment factors are separate issues that deserve consideration in their own right.
• Although regional variation in service use is smaller than regional variation in Medicare spending, it is substantial: Service use in higher use areas (90th percentile) is about 30 percent greater than in lower use areas (10th percentile). The range between the extremes shows an almost twofold difference, but, at the high end, fraud and abuse may drive some of the highest reported service use.
• Regions that have high levels of service use are not always the regions with high growth rates.
• Service use varies at all geographic levels, including within states and among providers within MSAs.

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