The Dartmouth Atlas and Obamacare
The real question in the debate about the Dartmouth Atlas is: Can government do a better job of managing medicine than doctors and hospitals can?


Avik Roy

The liberal end of the blogosphere is aflame with criticism of press coverage of a health-care database at Dartmouth College. While the debate may seem arcane, it is worth a closer look. For it relates to one of the key justifications for Obamacare: that the rising cost of health care is largely due to the greed and incompetence of physicians, and that government alone can fix this problem.

First, some background. Over 20 years ago, Dr. Jack Wennberg of
Dartmouth Medical School started tracking regional variations in Medicare expenditures; his diligent compilations came to be known as the Dartmouth Atlas of Health Care. The group that tends this database has gained broad academic respect over the years. In 1997, Wennberg’s son David helped to found Health Dialog, a consulting firm based on the Dartmouth work; in 2007, it was sold to British insurer Bupa for $775 million.

It wasn’t until 2009, however, that the Dartmouth Atlas became truly famous. In June of that year, Atul Gawande of The New Yorker published an article, “The Cost Conundrum,” describing medical practices in McAllen, Texas, an area that the Dartmouth Atlas identifies as one of the most expensive health-care markets in America. “In 2006,” observed Gawande, “Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average.”

But, wrote Gawande, there was no discernible justification for
McAllen’s high costs. In El Paso, a town that is in many ways similar to McAllen, Medicare spent only half of what it was spending in McAllen: $7,504 per enrollee. Importantly, the Dartmouth data suggested that McAllen’s increased medical utilization wasn’t leading to better results: Indeed, based on Medicare’s rankings, McAllen’s hospitals were performing worse than El Paso’s. The reasons, it appeared, were ignorance and avarice. Many doctors were simply unaware of how their practices deviated from medical convention. In addition, Medicare mostly pays doctors and hospitals on a fee-for-service basis; therefore, health-care providers have incentives to order more tests and conduct more operations, so they can collect more fees.

Gawande’s piece gained enormous attention. David Brooks called it “
the most influential essay of 2009.” It became required reading in the White House. Recounted Sen. Ron Wyden (D., Ore.), “[The President], in effect, took that article and put it in front of a big group of senators and said, ‘This is what we’ve got to fix.’” Peter Orszag, the White House budget director, used the Dartmouth data to argue that health-care expenditures could be reduced by $700 billion — over 30 percent — without sacrificing quality. The Dartmouth data allowed Democrats to imagine a glorious possibility: that the increased expense of universal health insurance could be paid for by intimately regulating medical practice in a way that wouldn’t harm, and might even improve, the quality of care.