What Accounts for the Rise in
Medicare Spending?
Kenneth E. Thorpe, Ph.D.
Robert W. Woodruff Professor and Chair
Department of Health Policy and Management
Rollins School of Public Health
Emory University
kthorpe@sph.emory.edu
404-727-3373
Academy Health Annual Meeting, Orlando, June 2007
Medicare Spending as Percentage of
GDP
14
12.9%
12
9.0%
10
8
6
Percentage of GDP
4.5%
4
2
0
2006
2030 Low 2030 High
Academy Health Annual Meeting, Orlando, June 2007
Overview


Crafting effective health reform solutions
requires a clear diagnosis of what accounts for
the growth in spending
Policy proposals to date to address the high and
rising costs of Medicare





Increase co-payments
Increase eligibility age
Reduce benefits
Reduce provider payments
Promote competition among private plans in
Medicare through “premium support”
Academy Health Annual Meeting, Orlando, June 2007
Overview
Issues
Do these solutions address the key drivers of
why Medicare spending is rising over time?
(Not for the most part)
Will or can “competition” in Medicare work?
Academy Health Annual Meeting, Orlando, June 2007
Bottom Lines


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Over 95% of health care spending in the Medicare
program is associated with 1 or more chronic health
care conditions
Medicare beneficiaries receive only about 60% of the
clinically recommended preventive care for these
conditions
Most of the rise in spending (over three quarters) is
linked to a rise in prevalence of treated disease:


Linked to rising rates of obesity
Linked to more aggressive detection and treatment of
asymptomatic patients (particularly for CVD risk)
Academy Health Annual Meeting, Orlando, June 2007
Factors Generating the Rise in
Medicare Spending

Rise in per capita spending can be decomposed
into:
Rise in the prevalence of treated disease
 Rise in spending per treated case
 Interactions

Academy Health Annual Meeting, Orlando, June 2007
Why Does Treated Prevalence Rise
Over Time?

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Rise in incidence and prevalence (obesity
underlies much of this) of disease
Technology (treatment expansion)
Changes in clinical thresholds (metabolic
syndrome) for treating asymptomatic patients
Better disease detection and screening (both by
patients and physicians—depression)
Others ?
Academy Health Annual Meeting, Orlando, June 2007
More Aggressive Treatment of
Asymptomatic Patients

True for:
Metabolic syndrome (nearly 52% of Medicare
enrollees )
 Hypertension
 Hyperlipidemia
 Other lipid abnormalities

Academy Health Annual Meeting, Orlando, June 2007
The Metabolic Syndrome: A Key
Cardiovascular Risk Factor

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The share of Medicare beneficiaries with the
metabolic syndrome has increased 5 percentage
points to 51 percent of adults in just 5 years!
Rates of pharmacologic treatment are rising as
well
Good news—more aggressive treatment may be
associated with the decline in CV mortality
Bad news—high and rising number of adults with
the metabolic syndrome—will continue to increase
health care spending!
Academy Health Annual Meeting, Orlando, June 2007
US is more aggressive in treating
asymptomatic patients with CV risk factors
60.0%
50.0%
55.3%
52.5%
36.3%
40.0%
30.0%
27.8%
20.0%
41.7%
27.4%
14.6%
10.0%
24.8%
9.9%
10.3%
26.0%
14.4%
0.0%
US
Clinical Prevalence
Canada
% Treated
England
Germany
Treated Prevalence
Academy Health Annual Meeting, Orlando, June 2007
Rising Treated Disease Prevalence among
Medicare Beneficiaries, 1997-2004
Medical Condition
Hyperlipidemia
Mental Disorders
Hypertension
Osteoarthritis
Pulmonary Disorders
Arthritis
Diabetes
Cancer
Heart Disease
1987 %
2004 %
11.0%
13.0%
37.9%
3.1%
20.2%
21.2%
13.5%
12.4%
25.8%
28.7%
20.7%
48.4%
6.8%
20.8%
28.2%
18.5%
13.9%
28.0%
Academy Health Annual Meeting, Orlando, June 2007
Trends in Prevalence

Virtually all the conditions with large
changes in prevalence are chronic.

Patients with chronic disease:
Have long-standing, on-going and largely predictable
medical care needs
 Are less likely to require hospital care compared to
acutely ill episodic cases
 Rely disproportionately on prescribed drugs,
physician and other provider care.

Academy Health Annual Meeting, Orlando, June 2007
Most of the rise in spending in Medicare
is linked to a rise in treated disease
Medical Condition
Δ Treated
Prevalence
Δ SPC
Population
Hyperlipidemia
71.5%
13%
15.6%
Mental Disorders
123.7%
-68.0%
44.6%
Hypertension
48.5%
21.3%
30.2%
Osteoarthritis
200.4%
-150.7%
49.9%
10%
40.7%
49.6%
Back Problems
48.9%
31.3%
19.8%
Diabetes
54.3%
18.8%
26.9%
Cancer
17.7%
59.2%
23.1%
Heart Disease
23.4%
36.3%
40.3%
Arthritis
45.7%
21.7%
32.6%
Pulmonary Disorder
Academy Health Annual Meeting, Orlando, June 2007
Rise in treated prevalence also linked to more
aggressive treatment of asymptomatic
patients
1988-1994
% with metabolic syndrome
1999-2003
46%
51.7%
Medicare (any adult)
% with NO Treatment
43.4% (39.1 - 47.7)
31.9% (25.9 - 37.8)
1 Condition
45.1% (40.8 – 49.4)
39.4% (33.3 - 45.5)
2 Conditions
11.2% (8.5 – 13.9)
23% (17.7 - 28.2)
3 Conditions
0.3% (0 - 0.8)
5.7% (2.8 - 8.7)
Treated for
Academy Health Annual Meeting, Orlando, June 2007
Implications
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Need to change how Medicare pays for health
care (toward bundled services for chronic
conditions)
Need to engage beneficiaries in selfmanagement through financial incentives (all
clinically recommended preventive services free)
Need to build appropriate models for delivering
care for today’s patients, not those of 1965!
Academy Health Annual Meeting, Orlando, June 2007