When Texas capped non economic medical malpractice damages to $250,000 in 2003, most conservatives argued that the reform would free doctors from having to prescribe unnecessary treatment. It didn’t happen. According to the Dartmouth research on disparities in health care spending, many Texan doctors are still prescribing aggressive treatments that don’t improve outcomes. In fact, as of 2006, Texas was still at the top of the list of high-spending states.
Ignore the bit on malpractice; just look at the bit on Texas as a high-spending state. But high spending in this context really refers to high Medicare spending; and Medicare funds substitute for other health dollars. Overall, it's not clear that Texas is spending "too little" or "too much" on healthcare.
But suppose it, and all other "high spending" areas, were overall high spenders. What would that mean? If you check out the link, you'll see what the Dartmouth people call "high spending" areas. By and large, these are urban areas with lots of poor people, and large huge health needs.
Just consider how silly this exercise would be if we looked at any other profession. What if we found that lawyers cost more in New York than Albany. Does all that extra New York spending reflect "waste" that we can costlessly cut through bureaucrats? Or is it just that the cost of items varies; and that cities in particular have high costs due to high costs of living, etc.?
It's even worse for healthcare because different populations and people will respond differently to medicine. You need to do a far more detailed analysis on the subgroups involved, etc. to get an idea of how medical dollars are being spent. But the Dartmouth group doesn't do this; they're convinced that 30% of healthcare spending is waste, and any difference in costs or outcomes around the country can be attributed to that.
It is probably true that a lot of health spending is wasted or unneccessary, for any number of reasons, some government related. But I doubt these problems can be easily fixed by cutting health spending for poor urban areas. In the past, when Medicare has cut reimbursements, doctors have responded by increasing the number of billed operations, and increasing the total cost. So top-down economizing could even have perverse results.
This is a tough issue, and clearly reform--particularly of Medicare--is necessary. But I have an instinctive fear of overly-ambitious policy wonks and technocrats. We'll see what kind of difference they make to policy.