The Soundbite:

Every beneficiary gets the same level of care no matter where they live. 

Fact or Fiction?

Fiction. The basic structure of the Medicare program is the same throughout the country. Nonetheless, there are multiple reasons why benefits can vary geographically and even more reasons why the actual care received can vary.

In terms of benefits, one important factor is the Medicare Advantage Plan (Part C), which makes private managed-care plans available to Medicare beneficiaries as an alternative to traditional, fee-for-service (FFS) Medicare. These plans can include health maintenance organizations (HMOs), preferred provider organizations (PPOs), and other types of plans. These plans are offered at the county level, so the number, type and benefits structure of plans available to beneficiaries can vary substantially. Similarly, insurers can offer Medicare Prescription Drug Plans (Part D) nationally, regionally or at the state level. Because many plans are offered in each service area, the benefit variation for Part D is smaller than the variation for Part C plans.

A less obvious source of variation in benefits applies to the traditional FFS Medicare program. Nominally, benefits do not vary geographically. However, Medicare contracts with private companies, called Fiscal Intermediaries (FI) or Medicare Administrative Contractors (MACs), to process claims. These contractors typically cover a single state or a regional group of states. In addition to processing claims, these contractors have authority to make certain coverage decisions or make judgments and policies regarding when certain exceptions can be made based on medical necessity.

Finally, beneficiaries have the option of purchasing supplemental insurance that covers services not covered by Medicare and also covers cost-sharing imposed by Medicare (deductibles and co-payments). The existence of such coverage clearly influences beneficiaries’ incentives to make cost-conscious care decisions.

In addition to these factors that determine the structure of benefits and the coverage of particular services, there is a large body of research documenting clinical practice pattern variations that do not appear to arise from geographic differences in the characteristics of patients (e.g., prevalence and severity of illness). Such variations can arise from a variety of sources, including: the local culture of medicine; local resources, capabilities and availability of providers; differences of opinion regarding optimal care; and differences in nonclinical characteristics of the population (e.g., income, preferences and purchase of supplemental coverage).

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