The costs of decedents in the Medicare program: implications for payments to Medicare + Choice plans

OBJECTIVE: To discuss and quantify the incentives that Medicare managed care plans have to avoid (through selective enrollment or disenrollment) people who are at risk for very high costs, focusing on Medicare beneficiaries in the last year of life-a group that accounts for more than one-quarter of Medicare's annual expenditures. DATA SOURCE: Medicare administrative claims for 1994 and 1995. STUDY DESIGN: We calculated the payment a plan would have received under three risk-adjustment systems for each beneficiary in our 1995 sample based on his or her age, gender, county of residence, original reason for Medicare entitlement, and principal inpatient diagnoses received during any hospital stays in 1994. We compared these amounts to the actual costs incurred by those beneficiaries. We then looked for clinical categories that were predictive of costs, including costs in a beneficiary's last year of life, not accounted for by the risk adjusters. DATA EXTRACTION METHODS: The analyses were conducted using claims for a 5 percent random sample of Medicare beneficiaries who died in 1995 and a matched group of survivors. PRINCIPAL FINDINGS: Medicare is currently implementing the Principal Inpatient Diagnostic Cost Groups (PIP-DCG) risk adjustment payment system to address the problem of risk selection in the Medicare+Choice program. We quantify the strong financial disincentives to enroll terminally ill beneficiaries that plans still have under this risk adjustment system. We also show that up to one-third of the selection observed between Medicare HMOs and the traditional fee-for-service system could be due to differential enrollment of decedents. A risk adjustment system that incorporated more of the available diagnostic information would attenuate this disincentive; however, plans could still use clinical information (not included in the risk adjustment scheme) to identify beneficiaries whose expected costs exceed expected payments. CONCLUSIONS: More disaggregated prospective risk adjustment methods and alternative payment systems that compensate plans for delivering care to certain classes of patients should be considered to ensure access to high-quality managed care for all beneficiaries.     

Long-Term Trends in Medicare Payments in the Last Year of Life

Objective. To update research on Medicare payments in the last year of life. Data Sources. Continuous Medicare History Sample, containing annual summaries of claims data on a 5 percent sample from 1978 to 2006. Study Design. Analyses were based on elderly beneficiaries in fee for service. For each year, Medicare payments were assigned either to decedents (persons in their last year) or to survivors (all others). Results. The share of Medicare payments going to persons in their last year of life declined slightly from 28.3 percent in 1978 to 25.1 percent in 2006. After adjustment for age, sex, and death rates, there was no significant trend. Conclusions. Despite changes in the delivery of medical care over the last generation, the share of Medicare expenditures going to beneficiaries in their last year has not changed substantially.     

The relationship between ex ante mortality risk and end-of-life medical costs

Background

Spending on medical care for patients in their last year of life accounts for over one-quarter of US Medicare programme outlays. While the magnitude of spending on end-of-life care is striking, it is difficult to determine if expenditures are wasteful or simply reflect the inherent uncertainty facing physicians.

Methods

Using a sample of fee-for-service Medicare beneficiaries, we document the association between mortality risk and end-of-life medical spending. Mortality risk at 1 year before death was estimated using a logistic model with age, sex and co-morbidities as covariates.

Results

We found that, among decedents, end-of-life spending is inversely related to predicted mortality risk, ranging from $US23 000 for decedents with mortality risk in the interval 0.00-0.05 to $US16 000 for decedents with mortality risk >0.25 (1999 dollar values). In aggregate, >50% of Medicare spending on medical care in the last year of life is for beneficiaries with below-median mortality risk.

Conclusions

We conclude that physicians treat patients who are likely to die differently than those who are not. Substituting palliative for curative care for patients with unfavourable prognoses may lower total expenditures, but probably not as much as commonly expected.     

Health care use and expenditures of Medicare HMO disenrollees

We examine the impact of the first wave of Medicare health maintenance organization HMO withdrawals. With data from CMS and United Health Group, we estimate use and expenditure changes between 1998 and 1999 for HMO enrollees who were involuntarily dropped from their plan and returned to fee-for-service (FFS) Medicare using a difference-in-difference model. Compared to those who voluntarily left an HMO, involuntarily disenrolled beneficiaries had higher out-of-pocket expenditures, an 80 percent decrease in physician visits, 38 percent higher emergency room (ER) use and a higher probability of dying. The results suggest beneficiaries face significant costs and reduced health outcomes from unstable Medicare managed care markets.     

Age and Gender Differences in Medicare Expenditures and Service Utilization at the End of Life for Lung Cancer Decedents

PURPOSE: Gender and age differences in medical care are well documented. We examined age and gender differences in Medicare expenditures for lung cancer decedents in the last year of life (LYOL) through a cross-sectional study of Medicare administrative and claims data. METHODS: Participants were aged Medicare beneficiaries (>or=68) with lung cancer, who were covered by Parts A and B for 36 months before death (1996-1999; n = 13,120). Regression techniques were used to estimate age and gender differences in mean Medicare utilization and expenditures in the LYOL overall and by type of service, conditional on use: inpatient, outpatient, physician, skilled nursing facility (SNF), home health, and hospice, controlling for demographic, clinical, geographic, and supply characteristics. RESULTS: Women were more likely than men to use inpatient, SNF, home health, and hospice services. Women's average expenditures were approximately dollars 1,900 greater than men's, with differences attributed to higher average expenditures for SNF, home health, and hospice. Older cohorts used fewer inpatient and outpatient services and used more SNF and hospice services in their LYOL. Average Medicare expenditures were significantly lower in older cohorts (dollars 8,487 less for those age >or=85 at death than for those 68-74). Adjusting for age explains most of the gender differences in average Medicare expenditures. Remaining gender differences vary across age cohorts, with larger gender differences in social-supportive service expenditures among those 68-74 and 75-84 and outpatient and physician services among those 75-84 and >or=85. DISCUSSION AND CONCLUSIONS: Our findings suggest that gender disparities in expenditures are generally small at the end of life for lung cancer decedents, particularly among the older cohorts. As expected, the bigger observed differences are by age although the direction of the association is not consistent across types of service. Higher expenditures for women on social-supportive services may reflect fewer informal supports for older women compared with men.     

Impact of influenza immunization on medical expenditures among Medicare elderly, 1999-2003

BACKGROUND: The impact of influenza immunization on expenditures for inpatient, outpatient, and professional services among elderly Medicare beneficiaries between 1999 and 2003 was examined. METHODS: Data were from independent annual survey samples of 175,000 beneficiaries. Response rates ranged from 64% to 71%. Survey data included beneficiaries' demographics, education, supplemental insurance, perceived health, and influenza vaccination. Baseline measures, derived from Medicare claims for the year prior to influenza season, included service utilization, comorbidities, influenza immunization, and health status. The outcome measure was medical expenditures for acute and chronic respiratory conditions (ACRCs) for each 33-week annual influenza season. RESULTS: Total expenditures for ACRCs were lower among the immunized population during all four seasons. The amount and statistical significance of the savings varied with the severity of the virus and the vaccine match to the prevalent influenza strains. During the 1999-2000 influenza season, which had the most severe virus and a close vaccine match, average costs for ACRCs were $88 lower among immunized beneficiaries than among nonimmunized beneficiaries (equivalent to a 3.06% savings). During the 2002-2003 season, which had a less severe virus but the highest vaccine match rate, average costs for ACRCs were $103 lower for immunized beneficiaries than for nonvaccinated beneficiaries (equivalent to a 3.12% savings). The relative reduction in ACRC expenditures among vaccinated beneficiaries is attributable to less frequent use of inpatient services. CONCLUSIONS: In addition to improving the health of older Americans, meeting the Healthy People 2010 influenza immunization goal of 90% among the elderly should also result in lower Medicare expenditures.     

Do HMOs reduce health care costs? A multivariate analysis of two Medicare HMO demonstration projects.

Charge data from two Medicare HMO demonstration projects were analyzed to determine if prepaid plans achieved cost savings for enrolled beneficiaries. Fallon Community Health Plan of Massachusetts did not reduce total charges significantly for survivors in their first year postenrollment. However, the plan enjoyed reductions in total charges per month after the first year of nearly 38 percent (41 percent for Part A; 31 percent for Part B). Savings for decedents were more modest, reducing total charges per month by around 27 percent (19 percent, Part A; 68 percent, Part B). Greater Marshfield Community Health Plan of Wisconsin was not successful in controlling charges during the demonstration period. Marshfield incurred losses in the first postenrollment year for survivors due to a 38 percent increase in total charges per month (18 percent, Part A; 73 percent, Part B). In the second year postenrollment, the Marshfield plan was able to reduce losses for survivors to roughly 11 percent (-6 percent, Part A; 44 percent, Part B). For decedents, Marshfield experienced an increase in total charges per month of approximately 21 percent relative to fee-for-service comparisons, with Part B charges again much higher than those of the comparison group (47 percent).     

What Happens When Hospital-Based Skilled Nursing Facilities Close? A Propensity Score Analysis

Objective. To assess the effects of hospital-based skilled nursing facility (HBSNF) closures on health care utilization, spending, and outcomes among Medicare fee-for-service beneficiaries.
Data Sources. One hundred percent Medicare fee-for-service claims files for 1997–2002 were merged with Medicare Provider of Services files and beneficiary-level enrollment records.
Study Design. Medicare spending, the use of postacute care, and health outcomes, were compared among hospitals that did and did not close their HBSNFs between 1997 and 2001. Hospitals were stratified according to propensity scores (i.e., predicted probability of closure from a logistic regression) and analyses were conducted within these strata.
Principal Findings. HBSNF closures were associated with increased utilization of alternative postacute care settings, and longer acute care hospital stays. Because of increased use of alternative settings, HBSNF closures were associated with a slight increase in total Medicare spending. There are no statistically robust associations between HBSNF closures and changes in either mortality or rehospitalization.
Conclusions. HBSNF closures altered utilization patterns, but there is no indication that closures adversely affect beneficiaries' health outcomes.     

Medicare Advantage Chronic Special Needs Plan boosted primary care, reduced hospital use among diabetes patients

The Affordable Care Act of 2010 authorized the continued availability of Medicare Advantage Chronic Condition Special Needs Plans (C-SNPs). This case study examines the model of care used by the largest such plan, Care Improvement Plus, and compares utilization rates among its diabetes patients with those of other beneficiaries enrolled in fee-for-service Medicare in the same five states. This special-needs plan emphasizes direct contacts with patients to help identify gaps in care and promote primary and preventive health care. The comparative analysis indicates that people with diabetes in the special-needs plan-particularly nonwhite beneficiaries-had lower rates of hospitalization and readmission than their peers in fee-for-service Medicare. For example, risk-adjusted hospital days per enrollee among special-needs plan participants were 19 percent lower than for fee-for-service Medicare enrollees (27 percent lower for nonwhite enrollees). Risk-adjusted physician office visits were 7 percent higher among C-SNP enrollees than among comparable fee-for-service enrollees (26 percent higher for nonwhite enrollees). Although this study does not include a cost analysis, we believe that savings from reduced hospitalizations are likely to more than offset the additional costs of enhanced primary care programs. Our study suggests that the Centers for Medicare and Medicaid Services may be able to adapt methods used by the C-SNP program to improve care and outcomes for beneficiaries with a broad range of chronic diseases.     

Do urgent care centers reduce Medicare spending?

We ask how urgent care centers (UCCs) impact healthcare costs and utilization among nearby Medicare beneficiaries. When residents of a zip code are first served by a UCC, total Medicare spending rises while mortality remains flat. In the sixth year after entry, 4.2% of the Medicare beneficiaries in a zip code that is served use a UCC, and the average per-capita annual Medicare spending in the zip code increases by $268, implying an incremental spending increase of $6,335 for each new UCC user. UCC entry is also associated with a significant increase in hospital stays and increased hospital spending accounts for half of the total increase in annual spending. These results raise the possibility that, on balance, UCCs increase costs by steering patients to hospitals.     

Sharp rise in medicare enrollees being held in hospitals for observation raises concerns about causes and consequences

When it is not clear that an ill patient needs to be hospitalized, he or she may be placed "under observation" in a hospital for further evaluation and short-term treatment. These hospital observation services, often a kind of halfway point between emergency department treatment and full inpatient admission, have become a hotly debated policy issue and subject of lawsuits. Using Medicare enrollment and claims data nationwide, we documented a rising trend in the prevalence and duration of hospital observation services in the fee-for-service Medicare population during 2007-09, accompanied by a downward shift in inpatient admissions. As a result, the ratio of observation stays to inpatient admissions increased 34 percent, from an average of 86.9 observation stay events per 1,000 inpatient admissions per month in 2007 to 116.6 in 2009. Medicare beneficiaries were increasingly subjected to hospital observation care and treated as outpatients instead of inpatients, which can expose them to greater out-of-pocket expenses if they are eventually admitted to skilled nursing facilities. Additionally, the nearly one million beneficiaries receiving observation services each year were, on average, being held in observation for a longer period of time per episode-some for longer than seventy-two hours. The prevalence of observation services varied greatly across geographic regions and hospitals. This may be an unintended consequence of Medicare payment policies designed to constrain hospital admissions. Additional research is needed to pinpoint the drivers and consequences of this phenomenon, as is more clarity in clinical practice and Medicare policy guidelines regarding observation care.     

The effect of HMOs on the inpatient utilization of medicare beneficiaries

OBJECTIVE: To determine the effect of joining HMOs (health maintenance organizations) on the inpatient utilization of Medicare beneficiaries. DATA SOURCES: We linked enrollment data on Medicare beneficiaries to patient discharge data from the California Office of Statewide Health Planning and Development (OSHPD) for 1991-1995. DESIGN AND SAMPLE: A quasi-experimental design comparing inpatient utilization before and after switching from fee-for-service (FFS) to Medicare HMOs; with comparison groups of continuous FFS and HMO beneficiaries to adjust for aging and secular trends. The sample consisted of 124,111 Medicare beneficiaries who switched from FFS to HMOs in 1992 and 1993, and random samples of 108,966 continuous FFS beneficiaries and 18,276 continuous HMO enrollees yielding 1,227,105 person-year observations over five years. MAIN OUTCOMES MEASURE: Total inpatient days per thousand per year. PRINCIPAL FINDINGS: When beneficiaries joined a group/staff HMO, their total days per year were 18 percent lower (95 percent confidence interval, 15-22 percent) than if the beneficiaries had remained in FFS. Total days per year were reduced less for beneficiaries joining an IPA (independent practice association) HMO (11 percent; 95 percent confidence interval, 4-19 percent). Medicare group/staff and IPA-model HMO enrollees had roughly 60 percent of the inpatient days per thousand beneficiaries in 1995 as did FFS beneficiaries (976 and 928 versus 1,679 days per thousand, respectively). In the group/staff model HMOs, our analysis suggests that managed care practices accounted for 214 days of this difference, and the remaining 489 days (70 percent) were due to favorable selection. In IPA HMOs, managed care practices appear to account for only 115 days, with 636 days (85 percent) due to selection. CONCLUSIONS: Through the mid-nineties, Medicare HMOs in California were able to reduce inpatient utilization beyond that attributable to the high level of favorable selection, but the reduction varied by type of HMO.     

Medicare spending for injured elders: are there opportunities for savings?

Claims for injury care provided to aged fee-for-service (FFS) beneficiaries cost Medicare more than $8 billion in 1999, almost 6 percent of Medicare claims spending for elders. More than one-fifth of aged FFS beneficiaries had an injury that resulted in a claim. Fractures, which were experienced by one in seventeen aged beneficiaries, were responsible far 67 percent of total injury claims expenses. Medicare could realize substantial savings if these injuries could be prevented; the program should consider underwriting effective prevention activities.     

Beneficiary selection, use, and charges in two Medicare capitation demonstrations.

Findings with regard to health status, service use, and charges are presented for Medicare beneficiaries who received care under Medicare risk contracts with two health maintenance organizations from 1980 through 1982 and for fee-for-service comparison groups. Health status of plan enrollees and fee-for-service beneficiaries were compared using mortality data, preenrollment claims, and self-reported health measures. Patterns of use and expenditures during preenrollment and postenrollment periods were examined using Medicare records and data supplied by the plans.     

The systematic assessment of variations in medical practices and their outcomes.

The Health Care Financing Administration of the Department of Health and Human Services has carried out for several years the systematic assessment of variations over time and among geographic locales in patterns of care and patterns of outcomes experienced by Medicare beneficiaries. This routine monitoring focuses principally on hospitalizations and their outcomes (death and readmission) and is based on the Medicare enrollment file and the claims file for inpatient care. The period 1985-88 has been marked by declining adjusted post-admission risks for mortality (down 4 percent) and readmission (down 6 percent) for Medicare beneficiaries. The downward trend in mortality risks is most evident following hospitalizations for acute myocardial infarction (down 8 percent) and stroke (down 12 percent). Hospital admission and population mortality rates, adjusted for differences in demographic and socioeconomic characteristics of the populations, vary substantially among areas as large as States and Metropolitan Statistical Areas, as do risk-adjusted post admission probabilities of death among those areas and among hospitals. Thus, if overall admission and mortality rates in the upper three quartiles of Metropolitan Statistical Areas were brought down to the average of the lowest quartile, there would be 20 percent fewer admissions and 12 percent fewer deaths within 180 days of admission for hospitalized patients. Although favorable trends in the effectiveness of the hospital care received by Medicare beneficiaries appear discernible, the existence of substantial variations suggests that further improvement may be possible.     

Medicare physician and hospital utilization and expenditure trends.

During the period 1983-86, the period directly following implementation of the Medicare prospective payment system, inpatient hospital care declined. Concurrently, fee-for-service utilization rates for physicians and other noninstitutional suppliers of medical goods and services and for outpatient facility care rose. Medicare expenditures for physicians and other suppliers and for outpatient facility care paralleled changes in utilization. In 1987, the proportion of Medicare patients receiving inpatient hospital care stabilized, but the proportion receiving outpatient hospital care continued to increase.     

The impact of payor/provider type on health care use and expenditures among the frail elderly.

OBJECTIVES: This study examined whether health care expenditures and usage by the frail elderly differ under three payor/provider types: Medicare fee for service, Medicare health maintenance organization (HMO), and dual Medicare-Medicaid enrollment. METHODS: In-home interviews were conducted among 450 frail elderly patients of a San Diego, Calif, health care system. Cost and use data were collected from providers. RESULTS: Analyses revealed no difference in total expenditures between fee-for-service and HMO enrollees, but Medicare-Medicaid beneficiaries' expenditures were 46.8% higher than those for HMO enrollees and 52.2% higher than those for the fee-for-service group. Fee-for-service participants were less than half as likely as HMO enrollees to have two or more hospital admissions, but hospital usage rates between those two payor/provider groups did not differ. Not were there payor/provider differences in access to home health care, but HMO home health care users received significantly fewer services than the others. CONCLUSIONS: The care provided to these HMO beneficiaries resulted in a combination of restricted home health use and higher multiple hospitalizations. This raises compelling questions for future research. For the dually enrolled, stronger cost containment may be required.     

Time trends in inpatient physician spending.

OBJECTIVE. Despite falling admissions and declining lengths of stay, Medicare expenditures for inpatient physician services have continued to climb; this article seeks to understand this trend by examining the expenditures on a per admission basis. DATA SOURCES AND STUDY SETTING. One hundred percent Medicare claims data were available from nine states for the 1985-1988 time period. STUDY DESIGN. Because Medicare's prospective payment system encourages hospitals to shift some services outside the inpatient setting, we examined trends in episodes of care, encompassing some time both before and after the inpatient stay itself. Trends were also examined at the individual DRG level in order to partially control for case-mix shifts and increased surgical use. Allowed charges were purged of both Medicare fee updates and geographic price variation in order to derive estimates of real spending growth. DATA COLLECTION/EXTRACTION METHODS. Hospital and physician claims were merged to form inpatient episodes that included seven days prior to admission as well as 30 days following discharge. PRINCIPAL FINDINGS. Physician spending per episode increased 27 percent just over this four-year time period, but with considerable variation by DRG ranging from only 2 percent for transurethral prostatectomies (TURPs) to 56 percent for uncomplicated acute myocardial infarctions (AMIs). Changes in case severity and hospital and physician characteristics were all found to be important contributors to the increase in physician inpatient spending. Most important seemed to be the growth in the number of physicians associated with the inpatient stay (and the subsequent increase in diagnostic tests and other procedures). CONCLUSIONS. The findings suggest that control of technology and control of the number of physicians involved in the care of a patient are both critical to constraining the rate of increase in physician inpatient expenditures.     

Mortality,Health Care Use,and Costs of Clostridioides difficile Infections in Older Adults

ObjectivesEstimate mortality, cost, and health care resource utilization for Medicare beneficiaries aged ≥65 years who suffered a primary Clostridioides difficile infection (CDI) episode only or any recurrent CDI, and understand how outcomes covary with death.DesignRetrospective observational claims analysis.Setting and ParticipantsPatients aged ≥65 years who had an inpatient or outpatient CDI diagnosis claim to Medicare and continuous enrollment in Medicare parts A, B, and D during the 12-month pre- and post-index periods.MethodsUsing 100% Medicare Fee-for-Service claims data for 2009–2017, primary (pCDI, n = 345,893) and recurrent (rCDI: n = 151,596) CDI episodes were identified. Demographic and clinical characteristics, mortality, health care resource utilization, and costs (per patient per month) were summarized for 12 months before and up to 12 months after episode start. Regression models were estimated for hospitalization risk, hospital length of stay (LOS), and cost to adjust for comorbidities.ResultsCDI-associated deaths were almost 10 times higher after recurrent CDI (25.4%) than primary CDI (2.7%). Compared with survivors, decedents were older, had higher Charlson Comorbidity Index scores, and were more likely Black. Adjusting for comorbidities, during follow-up, decedents had higher hospitalization rates [pCDI: odds ratio (OR) = 1.83, P < .001; rCDI: OR = 2.58, P < .001], and recurrent CDI decedents had more intensive care unit use (OR = 2.34, P < .001) compared with survivors. Decedents also had a longer length of stay (pCDI: +3.2 days, P < .001; rCDI: +2.6 days, P < .001), and higher total cost (pCDI: +303%, P < .001; rCDI: +297%, P < .001).Conclusions and ImplicationsCDI is an important contributing diagnosis to all-cause mortality, particularly for recurrences. Prior to death, older Medicare beneficiaries who experienced CDI received longer, more intensive, and more costly care compared with survivors. Clinicians should be particularly attentive to prevention, identification, and appropriate treatment of CDI in older adults. Better treatments to reduce primary C difficile infection and recurrences in this vulnerable population can lower both mortality and economic burden.     

The use and costs of Medicare services in the last 2 years of life.

This study reports on the use of services by Medicare enrollees who died in 1978. Decedents comprised 5.9 percent of the study group but accounted for 28 percent of Medicare expenditures. The use of services became more intense as death approached. Despite the idea that heroic efforts to prolong life are common, only 6 percent of persons who died had more than $15,000 in Medicare expenses in their last year of life. As shown here, the unique patterns of health care use by decedents and survivors should be fully understood and considered when contemplating changes in the Medicare program.