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Medicare Costs and Utilization Among Beneficiaries in Rural Areas

Henning-Smith, C., Wholey, D., Casey, M., Moscovice, I.

Ten percent of all Medicare beneficiaries account for 59% of all program expenditures. Although studies have shown that high per-capita spending does not directly correlate with high-quality care, little attention has been paid to where the high-cost areas are in rural communities and what strategies can be used to effectively manage their spending patterns.

The purposes of this study were to: 1) assess the relationship between service utilization patterns and costs for rural Medicare beneficiaries across the rural continuum (i.e., in places where Medicare spending is highest, what services are most likely to be used?); 2) examine the relationships between rural beneficiaries’ service utilization and health care delivery market structure; and 3) evaluate strategies and policies to address high costs in specific rural contexts.

Key Findings:

  • In rural areas, Medicare spending and use of services among beneficiaries vary significantly.
  • Rural, isolated areas tend to have the highest average total costs per beneficiary, compared with small town and micropolitan areas, as well as more inpatient stays and hospital outpatient visits.
  • Rural, isolated areas had fewer physician visits and fewer physicians per capita than their larger rural counterparts.
  • After sorting health care delivery areas by average cost per beneficiary, being in the highest-cost group was associated with more inpatient stays, outpatient visits, and skilled nursing facility days, but with lower physician visits than low and mid-cost groups.

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