Geographic variation in per-beneficiary Medicare spending that cannot be explained by wages and the prices of other inputs to health care or by demographic and health characteristics, as described by Dartmouth researchers, has intrigued researchers and stimulated policy debates for years.1- 4 Without evidence that Medicare beneficiaries in high-spending areas have better health outcomes than those in low-spending areas, policy makers have asked whether low-spending areas were being penalized while high-spending areas were being inappropriately rewarded. Wouldn’t it make sense to adopt policies to reduce expenditures in high-cost areas, perhaps by paying physicians and hospitals in those areas less? Could a similar case be made to address geographic variation in private health insurance expenditures?
Newhouse, Joseph P., and Alan M. Garber. "Geographic Variation in Health Care Spending in the United States." JAMA 310.12 (September 25, 2013): 1227-8.