In defiance of recent efforts to institute mandatory health insurance in the U.S., even for otherwise healthy people, studies using similar current government programs like Medicare show that while Medicare spending varies greatly by geographic area, there is little to show for it by people who are in regions where spending is greater - the health outcomes for people who live in expensive geographic areas are no better than those who live in poor geographic areas.    Spending makes little difference.

As a result, Obama administration policymakers have considered limiting Medicare payments in high-cost areas to try and contain costs for nationalized health care for everyone, a move elderly groups are against.

By analyzing data from more than 17,000 Medicare beneficiaries, a group of researchers have found money does matter and their new metric says that spending more on Medicare medical expenses actually resulted in greater survival and a better overall health score, using their own index that measures perceived health and activity limitations.

They say the decades of previous studies showing more money does not mean better help were flawed because those studies looked at large swathes of populations, typically by geographic location, and used averages to draw their conclusions. "The implication was that higher spending was not contributing to better health," says George Mason University Health Administration and Policy Professor Jack Hadley.    "While that finding is very persuasive, it doesn't look at individuals and the amount of medical care that they each receive."

In this study, the research team used data from the Medicare Current Beneficiary Survey, which collects extensive information from Medicare participants over a three-year span, to determine whether a relationship existed between medical spending and better health.

"The surveys provide much richer information about the person's health condition than one can typically get from insurance claims data," says Hadley.  "Over this three-year period-controlling for people's health when they first come into the survey and new diagnoses they may have had over the course of the three years-what was their health like at the end of the observation period? And did that vary with how much medical care they received as individuals?" 

The statistical analysis indicates that the individuals' health did vary with their medical care spending. Over a three-year span, for a 10 percent increase in medical spending, there was 1.9 percent increase in the patient's health score, called the Health and Activity Limitations Index and a 1.5 percent greater survival probability.

The researchers classify this finding as a "modest effect" but stress that "the key thing is that we did find a positive relationship as opposed to other studies which have suggested that there's no relationship between how much care a person receives and what their health outcomes are."

"This suggests that policymakers need to understand that across-the-board reductions in Medicare spending in a geographic area or on a national level could have harmful effects on beneficiaries' health," The Urban Institute's Timothy Waidmann, a co-author, explains. "To look for inefficiencies, you need to look more closely at specific conditions and diseases and how those are treated. Analysis from 40,000 feet just doesn't do that for you."

 The full results of the study "Medical Spending and the Health of the Elderly" will appear in an upcoming edition of the journal Health Services Research.