title: Patients' preferences explain a small but significant share of regional variation in medicare spending.
abstract: This study assessed the extent to which differences in patients' preferences across geographic areas explained differences in traditional fee-for-service Medicare spending across Dartmouth Atlas of Health Care Hospital Referral Regions (HRRs). Preference measures were based on results of a survey that asked patients questions about their physicians, their own health status, and the care they would want in their last six months of life. We found that patients' preferences explained 5 percent of the variation across HRRs in total Medicare spending. In comparison, supply factors, such as the number of physicians, specialists, and hospital beds, explained 23 percent, and patients' health and income explained 12 percent. We also explored the relative importance of preferences in determining three components of total spending: spending at the end of life, inpatient spending, and spending on physician services. Relative to supply factors, health, and income, patients' preferences explained the largest share of variation in end-of-life spending and the smallest share of variation in spending on physician services. We conclude that variation in preferences contributes to differences across areas in Medicare spending. Medicare policy must consider both supply factors and patients' preferences in deciding how much to accommodate area variation in spending and the extent to which that variation should be subsidized by taxpayers.
authors.affiliation: Laurence C. Baker is a professor of health research and policy at Stanford University, in California, and a research associate at the National Bureau of Economic Research, in Cambridge, Massachusetts.
authors.forename: Laurence C
authors.initials: LC
authors.lastname: Baker
authors.affiliation: M. Kate Bundorf is a professor of health research and policy at Stanford University and a faculty research fellow at the National Bureau of Economic Research.
authors.forename: M Kate
authors.initials: MK
authors.lastname: Bundorf
authors.affiliation: Daniel P. Kessler (fkessler@stanford.edu) is a professor in the Law School and the Graduate School of Business, a professor (by courtesy) in the Department of Health Research and Policy, and a senior fellow at the Hoover Institution, all at Stanford University. He is also a research associate at the National Bureau of Economic Research.
authors.forename: Daniel P
authors.initials: DP
authors.lastname: Kessler
mesh_terms: D000368:Aged; D018588:Fee-for-Service Plans / Q000191:economics*; D005260:Female; D019538:Health Care Surveys; D005102:Health Expenditures / Q000706:statistics & numerical data*; D017721:Hospital Costs; D006801:Humans; D007357:Insurance, Physician Services / Q000191:economics; D008297:Male; D006278:Medicare / Q000191:economics*; D057240:Patient Preference / Q000191:economics*; D012041:Regional Medical Programs / Q000191:economics*; D013727:Terminal Care / Q000191:economics; D014481:United States
keywords: Health Economics; Health Spending; Medicare; Variations