Long-Term Trends in the
Concentration of Medicare Costs
Gerald F. Riley
Centers for Medicare and Medicaid Services
AcademyHealth
Orlando, Florida
June 5, 2007
Introduction
• Medicare costs known to be highly
concentrated
• High costs often persist year-to-year
• Many cost containment efforts focus on
expensive cases
– Case management
– Disease management
– Chronic care improvement
Research questions
• Has the concentration of Medicare costs
changed over time?
• Has the mix of services used by high cost
beneficiaries changed?
• What are the characteristics of high cost
beneficiaries?
• Has the persistence of high costs at the
individual level changed?
Continuous Medicare History
Sample
• Longitudinal 30 year file (1975 – 2004)
• Five percent digital sample of Medicare
enrollees
• Contains Medicare enrollment and claims
data
• Annual cost and utilization data by type of
service for each beneficiary
• Data absent for 1998-2000
Methods
•
•
•
•
Study used 20% subsample of file
Entitled to Part A and Part B
Fee-for-service only
Percentage of Medicare costs attributable
to the most expensive 5% of beneficiaries
• Examined one year and four year periods
• Chronic conditions identified from
physician claims (1995 and 2004)
Percentage of annual Medicare costs attributable
to the most expensive beneficiaries
60.0%
50.0%
40.0%
Top 5%
30.0%
Top 1%
20.0%
10.0%
Year
20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
19
83
19
81
19
79
19
77
19
75
0.0%
Distribution of Medicare costs across types of
services
100%
80%
Home health/hospice
60%
Skilled nursing facility
Outpatient
Physician/supplier
40%
Inpatient hospital
20%
0%
1975 -- All
1975 -- Top 5%
2004 -- All
2004 -- Top 5%
Characteristics of most expensive 5% of
beneficiaries compared to all beneficiaries, 2004
•
•
•
•
•
•
•
Age < 65
Age 65-74
Age 75+
Black
Buy-in
ESRD
Died
All
Top 5%
15.3%
40.8%
43.9%
9.6%
16.2%
0.8%
4.9%
16.8%
30.3%
52.9%
14.2%
21.3%
8.9%
21.4%
All differences significant at the 0.01 level.
Prevalence of conditions among most expensive
5% of beneficiaries,1995 and 2004
•
•
•
•
•
•
•
Ischemic heart disease
Heart failure
Diabetes
Cancer
Kidney disease
Mental disorders
COPD
1995
2004
37.6%
29.0%
19.4%
22.2%
15.9%
21.2%
20.9%
39.1%
32.7%
25.1%
24.9%
23.9%
23.6%
22.7%
All differences significant at the 0.01 level.
Percentage of Medicare costs attributable to most
expensive beneficiaries, aggregated over 4 year periods
40.0%
35.0%
30.0%
25.0%
Top 5%
20.0%
Top 1%
15.0%
10.0%
5.0%
0.0%
1975-1978
1980-1983
1985-1988
1990-1993
Years
1994-1997
2001-2004
Persistence of high Medicare costs from year to
year
• Top 5% in
year
• 1975
• 1980
• 1985
• 1990
• 1995
• 2001
• 2002
Top 5% in
year+1
17.4%
20.0%
19.5%
21.3%
24.8%
23.7%
23.8%
Top 5% in
year+2
12.1%
12.4%
13.0%
14.0%
16.4%
15.5%
14.9%
Why a decrease in
concentration?
• Shift from inpatient hospital to ambulatory
services
• Stability of the Part B deductible
• Increased longevity?
• Technology being used on less sick patients?
Implications/Future trends
• Chronic care improvement may
increasingly affect high cost beneficiaries
• Smaller impact of cost containment efforts
targeted to high cost individuals?
• Part D may further reduce concentration