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Rural Versus Urban Medicare Beneficiaries: Little Variation In Utilization

October 30th, 2013
by Chris Fleming

The assumption that rural beneficiaries systematically receive less care than urban beneficiaries is one factor that has led Medicare to pay rural providers $3 billion more each year in special payments than they would receive under traditional payment rates.

A Health Affairs Web First study released today finds that some of these payments may not be necessary. Jeffrey Stensland and colleagues at the Medicare Payment Advisory Commission (MedPAC) compared the use of medical services by urban and rural areas using claims data from all Medicare fee-for-service beneficiaries in 2008; they found no significant differences between rural and urban beneficiaries in either the amount of health care received or in satisfaction with access to care. After adjusting for health status, rural and urban areas in the same region had nearly identical rates of service use.

Although the study found no significant differences between rural and urban beneficiaries in the same region, it did find large differences across both urban and rural areas in different regions. Regional differences among Medicare beneficiaries were larger and more stable than any observed rural differences.

“The key policy implication of this article is that Medicare should not use rural location as a proxy for low service use or access to care,” conclude the authors. “Policies that implicitly assume all rural areas are homogeneous and all rural beneficiaries are underserved are not supported by the data.” This evidence also led the authors to conclude that what region a beneficiary lives in is a “much more potent driver of high versus average service use than whether he or she lives in an urban or rural area.”

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1 Response to “Rural Versus Urban Medicare Beneficiaries: Little Variation In Utilization”

  1. Lynn Barr Says:

    It is important to understand whether Medicare supplemental payments to rural providers result in higher Medicare Fee-For-Service (FFS) total per beneficiary spending for rural beneficiaries compared to urban beneficiaries within the same state. We analyzed the difference between urban and rural per beneficiary spending for calendar year 2011 in the 2012 Medicare and Medicaid Statistical Supplement (MMSS) Table 3.5 – Program Payments for Medicare Beneficiaries Residing in Urban and Rural Areas, by Area of Residence. Nationally, the average cost per rural beneficiary is $397.43 less than urban beneficiaries in the same state, or 4.1% less than the national average per beneficiary cost.

    Although rural providers receive supplemental payments, Medicare FFS rural per beneficiary cost is lower than Medicare urban per beneficiary cost. CAH payments in 2011 totaled $8 billion. A 1% decrease in CAH reimbursement would save approximately $85 million/year. If 10% of CAH’s closed due to the payment reduction and patients migrated to urban PPS facilities in the same states, this could increase Medicare spending by $327 million if rural beneficiary costs rose to the urban level. This increase would offset the projected $100 million decrease in annual spending forecasted by the CBO under the president’s proposed budget, and would result in increased annual spending of the Medicare Trust Fund of $227 million

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