Regional Variations and Productivity Puzzles in Health Care

Health care utilization per capita varies widely across the United States, yet higher utilization areas have no better patient health. In the late 2000s, this pattern was widely interpreted as evidence that health care costs could be cut substantially without harming patients, which in turn shaped the 2010 Affordable Care Act. We describe how our understanding has since evolved, emphasizing three points. First, new evidence indicates quantitatively meaningful roles for both supply-side and demand-side factors in driving regional variation in health care and in health outcomes. Second, health care productivity varies substantially across providers; improving it requires better understanding of why productivity differs. Third, we know even less about the sources of area-level productivity differences. We suggest several ways in which greater engagement with the productivity literature outside of health care could yield valuable insights.