Bad Practices Net Hospitals More Money

Along with its sister program, Medicaid -- which covers the poor -- Medicare exerts a huge influence on the entire health care system. Hundreds of insurers, large and small, follow its lead. In that sense, the government health program provides a window into the quality shortcomings that plague most of American medicine.

For a year, The Washington Post crisscrossed the country to examine the economics of Medicare and how it monitors the quality of its services -- reviewing thousands of documents and interviewing hundreds of researchers, regulators and patients. Medicare is highly valued by 42 million elderly and disabled members, but it wastes an enormous amount of money on inefficient medicine, the examination found.

Researchers at Dartmouth Medical School, who have been studying Medicare's performance for three decades, estimate that as much as $1 of every $3 is wasted on unnecessary or inappropriate care. Other analysts put the figure as high as 40 percent.

"It is astounding," said Arnold Millstein, an expert on medical quality and a member of an advisory board to Medicare. Increasingly, he added, the waste is driving up the overall cost of health care. "We are medically impoverishing increasing numbers of Americans in part because of our inattention to eliminating waste," he said.

Medicare has difficulty controlling waste because of deficiencies in the way it monitors and enforces quality standards. Its oversight system is fragmented, underfunded and marred by conflicts of interest, records and interviews show. For every $1,000 that it pays to hospitals and doctors, it invests just $1 or $2 to oversee and improve patient care.

"The amount we spend on quality is a pittance," said Kenneth W. Kizer, a physician and president of the National Quality Forum, a nonprofit that works with Medicare officials to develop standards of care.

Medicare has outsourced many enforcement activities to private groups that have overlooked or missed cases in which patients were injured or killed, according to hundreds of inspection reports and interviews with state regulators. Some facilities haven't been checked in years.

Medicare officials do collect reams of information on quality of care. Yet in many cases the data aren't analyzed or are locked inside incompatible 20-year-old computers.

One result: striking variations in what Medicare pays for care in different states, or even neighboring Zip codes. In 2001, the typical Medicare patient in Los Angeles cost the government $3,152 more than a comparable patient in the District. A patient in Miami cost $3,615 more than one in Baltimore.

Those disparities cannot be explained by differences in local prices or rates of illness, said John E. Wennberg, a Dartmouth physician and an expert on geographical variations in medical care. Rather, higher spending is related to the number of specialists, hospital beds and technology available. "If you have twice as many docs in a community," said Wennberg, "you end up with twice as many office visits."

Yet most high-spending states rank near the bottom in quality of care, Medicare data show. Louisiana ranked 50th in quality yet first in Medicare spending in 2001, the most recent year available. New Hampshire was first in quality but 47th in spending.

Medicare acknowledges that its system rewards bad care. Officials have only recently begun to address the problem.