The Geography of Medicare

16 Pages Posted: 17 Jun 1999

See all articles by Louise Sheiner

Louise Sheiner

Federal Reserve Board - Division of Research and Statistics; National Bureau of Economic Research (NBER)

David M. Cutler

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Abstract

There is a great deal of geographic variation in Medicare spending. For example, while the average Medicare cost per beneficiary was around $5200 in 1996, Medicare spending, adjusted for diffences in regional prices and demographic composition, was about $8000 per person in Miami, but only $3500 in Minneapolis. In this paper, we explore the source of this variation. We find that a substantial amount can be explained by differences across areas in the health of the elderly population. This finding suggests that some of the geographic variation in Medicare spending is efficient. But even accounting for differences in the health of the population, significant variation remains. We have been able to explain some of the remaining variation. The strongest factors are supply variables: for-profit hospitals and specialist physicians both increase Medicare spending. If these factors are exogenous, public policy may want to consider the supply of medical services more than it currently does. We do not find that expensive places spend a disproportionate amount on those near death.

JEL Classification: I1, H5, H6

Suggested Citation

Sheiner, Louise and Cutler, David M., The Geography of Medicare. Finance and Economics Discussion (FEDS) Working Paper No. 99-18. Available at SSRN: https://ssrn.com/abstract=165508 or http://dx.doi.org/10.2139/ssrn.165508

Louise Sheiner (Contact Author)

Federal Reserve Board - Division of Research and Statistics ( email )

Washington, DC 20551
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

David M. Cutler

Harvard University - Department of Economics ( email )

Littauer Center, Room 315A
Cambridge, MA 02138
United States
617-496-5216 (Phone)
617-495-8570 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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