Competition drives down the cost of health care, right? Wrong.

This nifty little tool produced by the Dartmouth Atlas of Health Care and the Robert Wood Johnson Foundation shows average Medicare spending per enrollee by hospital region. What you can see is that places with the greatest number of medical facilities also have the highest costs.

You may assume that hospitals in Billings, Montana, or Casper, Wyoming would set the highest prices because they have a monopoly on medical care. But the opposite is true. In 2006 Medicare spent an average of $6,332 per enrollee in Billings and $5,999 in Casper. In Miami Medicare spent $16,351 per enrollee and $10,810 in Los Angeles.

Average per enrollee spending in Raleigh was $8,051 and in Charlotte was $7,742. Researchers at Dartmouth Medical School have shown repeatedly that patients do not receive better care in higher spending regions. And patient surveys show that people are more dissatisfied with care in high spending regions.

More competition drives up the cost of care because when several hospitals are competing for patients and doctors they feel more pressure to build more beds, provide more amenities, and purchase the latest expensive gadgets. Instead of focusing on patient preference and improving care, hospitals are in an arms race to gain market share. That makes health care more expensive for everyone.

And because Medicare is a federal program North Carolina, a relatively efficient state, is helping to subsidize the inefficient, expensive states like Florida, Texas, California, and Pennsylvania.

North Carolina has kept total spending down because of reasonably strong Certificate of Need laws, which tend to restrain health costs — by limiting the number of gadgets a hospital can buy — and improve quality — fewer hospitals performing a higher volume of a particular surgery tend to achieve better outcomes than many hospitals doing lower volumes.

Medicare spending per enrollee in our state has grown more than 4.4 percent annually from 1992 to 2006, which is high compared to many regions in the country. That is partly because we were relatively efficient to begin with — there wasn’t much room for Miami to get any worse. And it’s mostly likely due in part to the particular way Certificate on Need laws are structured. As health policy writer Maggie Mahar has noted, hospitals have an incentive to overuse MRI scanners and other technology because CON reviewers look at utilization to help make final determinations. If you aren’t using your MRI scanner, after all, you don’t really need another one.

So we probably need to figure out new ways to gauge need in different hospital regions, but we don’t need our state to look like Texas or California. We all pay for the unhealthy competition between health care providers in cities like Houston, Los Angeles, and Miami.