Does variation in medical care spending by individual elderly Medicare beneficiaries influence their health? This pilot project identified policy, patient, and market factors that influence individuals’ Medicare and total health care spending. The researchers focused primarily on identifying whether there are factors that have a significant impact on medical spending and are arguably independent of health status. Such factors could be used to construct an instrumental variable for medical care spending in a follow-on study. This research provided a better understanding of the influence of factors that affect individual health care spending so policymakers can develop incentives to reduce “unnecessary” spending without harming beneficiaries’ health.