Want to hear something scary? Listen to an economist who co-authored an influential study on how the cost of treating Medicare patients varies from city to city.

“The stimulus package is just a drop in the bucket compared to what’s going to happen,” says Jonathan Skinner. “It’s all about health care. We’re just hammering the federal budget. It really goes to the heart of whether U.S. Treasuries are going to become junk bonds or not. It’s not the aging of the population, it’s all about out-of-control health care costs.”

President Barack Obama knows that. It’s why he puts the issue front and center, and it's why he's argued in favor of including a government-run insurance program to compete with private insurers. Republicans and more fiscally conservative Democrats are skeptical or downright hostile to the idea.

To get some sense for how a federal insurance plan might help or hurt costs, it's worth taking a look at Medicare, one of the government's two existing public health care insurance programs. That's what Skinner did with his study for the Dartmouth Institute for Health Policy and Clinical Practice. The study has its fans in the administration.

“It’s integral,” to the Obama administration’s approach to health care, said Kenneth Baer, a spokesman for the White House Office of Management and Budget. Those regional differences in quality of care and cost, Baer says, “shapes how the administration approaches health care. The insight is driving people to realize that the status quo is unsustainable.”

The Dartmouth researchers studied how much it cost to treat Medicare patients in every region of the country from 1992 to 2006. What they found was that in some sections, the growth in treatment costs dwarfed other regions, and the patients in the high-cost areas were not getting better care than those in low-cost regions.

They found, for instance, that it costs nearly twice as much to treat a patient in Miami as it does in San Francisco. In Rochester, Minnesota, the home of the world-famous Mayo Clinic, the cost per Medicare patient was a fraction of the cost to treat a Medicare patient in Dallas. In Dallas, the cost of treating Medicare patients rose twice as fast as the cost in San Diego.

Nationally, Medicare spent an average of $8,304 per enrollee in 2006, and annual costs grew 3.5 percent a year from 1992 to 2006. At that rate, Medicare will be $660 billion in the red by 2023. But if the nation could cut its annual growth rate to the rate at which San Francisco grew during the study, 2.4 percent, Medicare could save $1.42 trillion, turning a deficit into a balance of $758 billion.

“The way that physicians deal with things is different in San Francisco,” Skinner says. “It would be nice to capture it in a bottle and spread it around.”

The study’s authors suggest that the differences in cost boil down to decisionmaking by doctors and to the way doctors and hospitals are paid. In high-cost areas, the authors found, doctors were more likely to recommend discretionary services, such as referral to a subspecialist for heartburn or hospital admission for an 85-year-old patient with an exacerbation of end-stage congestive heart failure. In low-cost areas, physicians were more likely to be salaried and not have their incomes determined by the numbers of patients they saw and the tests they recommended.

But under the current system, doctors can’t afford the time it takes to help patients understand why a test isn’t needed. And hospitals lose money when they improve in ways that reduce patient admissions. The study’s authors wrote in a New England Journal of Medicine article that the key to reform is changing the way doctors and hospitals are paid.

The study, though, is also cause for hope for policymakers, Baer said. Because the study shows that there are lower-cost, high-quality regions in the United States, it also shows that solutions to the cost conundrum are available by adopting the best practices right here at home.

“In our own country we have the ability,” to find approaches that work with high quality and low cost, Baer said.