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Statistics: Variance in Medicare Spending of Northern V Sout

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Medicare spending per patient in different U.S. metropolitan areas may differ. Based on the sample
data below, is the average spending in the northern region significantly less than the average
spending in the southern region at the 1 percent level?

(a) State the hypotheses and decision rule.
(b) Find the test statistic assuming unequal variances.
(c) State your conclusion. Is this a strong conclusion?
(d) Can you suggest reasons why a difference might exist? (See The New Yorker [May 30, 2005], p. 38).

Medicare Spending per Patient (adjusted for age, sex, and race)
Statistic Northern Region Southern Region
Sample mean $3,123 $8,456
Sample standard deviation $1,546 $3,678
Sample size 14 patients 16 patients

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Solution Summary

A complete, neat and step-by-step solution is provided in the attached Excel file with regards to exploring the variance in medicare spending.

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