Healthcare researchers have known for some time that there are large regional variations in the cost of medical care. The well-respected and long-running Dartmouth Atlas of Health Care project has documented this for years. A recent widely read article by Atul Gawande in the The New Yorker highlighted some particularly astounding examples of how the same healthcare can cost much more in one place than in another, even if the demographics of those two places are virtually the same.
Most analysts think there are huge amounts of money to be saved by trimming back the expensive places. Not surprisingly, some of these places have pushed back, asserting that their costs are higher because their patients are sicker. After all, one person’s excess cost is another person’s revenue stream. In claiming this, however, they ignore the fact that the Dartmouth research has been corrected for case mix to eliminate that possibility as an explanation for the cost differences. A recent editorial in the New England Journal of Medicine labels this defense “the reverse Lake Wobegon effect,” after the fictional town devised by humorist Garrison Keillor, a place where “all of the children are above average.”
Anybody who looks at the data recognizes that it is a lame defense — in these expensive places the care is just more expensive, not better. Sometimes the more expensive care is even worse care.