Academy Health Annual Meeting, Orlando, June 2007 What Accounts for the Rise in Medicare Spending? Kenneth E. Thorpe, Ph.D. Robert W. Woodruff Professor

Academy Health Annual Meeting, Orlando, June 2007

What Accounts for the What Accounts for the Rise in Medicare Rise in Medicare

Spending? Spending?

Kenneth E. Thorpe, Ph.DKenneth E. Thorpe, Ph.D..Robert W. Woodruff Professor and ChairRobert W. Woodruff Professor and Chair

Department of Health Policy and ManagementDepartment of Health Policy and ManagementRollins School of Public HealthRollins School of Public Health

Emory UniversityEmory [email protected]@sph.emory.edu

404-727-3373404-727-3373


Medicare Spending Medicare Spending ChallengeChallenge

Medicare Spending as Medicare Spending as Percentage of GDPPercentage of GDP

0

2

4

6

8

10

12

14

2006 2030 Low 2030 High

Percentage of GDP4.5%

9.0%

12.9%


OverviewOverview

Crafting effective health reform Crafting effective health reform solutions requires a clear diagnosis solutions requires a clear diagnosis of what accounts for the growth in of what accounts for the growth in spendingspending

Policy proposals to date to address Policy proposals to date to address the high and rising costs of Medicarethe high and rising costs of Medicare

Increase co-paymentsIncrease co-payments Increase eligibility ageIncrease eligibility age Reduce benefitsReduce benefits Reduce provider paymentsReduce provider payments Promote competition among private plans Promote competition among private plans

in Medicare through “premium support”in Medicare through “premium support”


OverviewOverview

IssuesIssues

Do these solutions address the key Do these solutions address the key drivers of why Medicare spending drivers of why Medicare spending is rising over time? (Not for the is rising over time? (Not for the most part)most part)

Will or can “competition” in Will or can “competition” in Medicare work?Medicare work?


Bottom LinesBottom Lines Over 95% of health care spending in the Over 95% of health care spending in the

Medicare program is associated with 1 or Medicare program is associated with 1 or more chronic health care conditionsmore chronic health care conditions

Medicare beneficiaries receive only about 60% Medicare beneficiaries receive only about 60% of the clinically recommended preventive care of the clinically recommended preventive care for these conditionsfor these conditions

Most of the rise in spending (over three Most of the rise in spending (over three quarters) is linked to a rise in prevalence of quarters) is linked to a rise in prevalence of treated disease:treated disease: Linked to rising rates of obesityLinked to rising rates of obesity Linked to more aggressive detection and treatment Linked to more aggressive detection and treatment

of asymptomatic patients (particularly for CVD risk)of asymptomatic patients (particularly for CVD risk)


Factors Generating the Rise Factors Generating the Rise in Medicare Spendingin Medicare Spending

Rise in per capita spending can be Rise in per capita spending can be decomposed into:decomposed into: Rise in the prevalence of treated Rise in the prevalence of treated

diseasedisease Rise in spending per treated caseRise in spending per treated case Interactions Interactions


Why Does Treated Why Does Treated Prevalence Rise Over Time?Prevalence Rise Over Time?

Rise in incidence and prevalence (obesity Rise in incidence and prevalence (obesity underlies much of this) of diseaseunderlies much of this) of disease

Technology (treatment expansion)Technology (treatment expansion) Changes in clinical thresholds (metabolic Changes in clinical thresholds (metabolic

syndrome) for treating asymptomatic syndrome) for treating asymptomatic patientspatients

Better disease detection and screening Better disease detection and screening (both by patients and physicians—(both by patients and physicians—depression)depression)

Others ? Others ?


More Aggressive Treatment More Aggressive Treatment of Asymptomatic Patientsof Asymptomatic Patients

True for:True for: Metabolic syndrome (nearly 52% of Metabolic syndrome (nearly 52% of

Medicare enrollees )Medicare enrollees ) HypertensionHypertension HyperlipidemiaHyperlipidemia Other lipid abnormalitiesOther lipid abnormalities


The Metabolic Syndrome: A The Metabolic Syndrome: A Key Cardiovascular Risk Key Cardiovascular Risk

FactorFactor The share of Medicare beneficiaries with the The share of Medicare beneficiaries with the

metabolic syndrome has increased 5 metabolic syndrome has increased 5 percentage points to 51 percent of adults in percentage points to 51 percent of adults in just 5 years!just 5 years!

Rates of pharmacologic treatment are rising Rates of pharmacologic treatment are rising as wellas well

Good news—more aggressive treatment may Good news—more aggressive treatment may be associated with the decline in CV be associated with the decline in CV mortalitymortality

Bad news—high and rising number of adults Bad news—high and rising number of adults with the metabolic syndrome—will continue with the metabolic syndrome—will continue to increase health care spending! to increase health care spending!


US is more aggressive in treating US is more aggressive in treating asymptomatic patients with CV asymptomatic patients with CV

risk factorsrisk factors55.3%

41.7%

27.4%27.8%

36.3%

26.0%24.8%

52.5%

14.4%10.3%9.9%14.6%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

US Canada England Germany

Clinical Prevalence % Treated Treated Prevalence


Rising Treated Disease Rising Treated Disease Prevalence among Medicare Prevalence among Medicare

Beneficiaries, 1997-2004Beneficiaries, 1997-2004

Medical Condition 1987 % 2004 %

HyperlipidemiaHyperlipidemia

Mental DisordersMental Disorders

HypertensionHypertension

OsteoarthritisOsteoarthritis

Pulmonary DisordersPulmonary Disorders

ArthritisArthritis

DiabetesDiabetes

CancerCancer

Heart DiseaseHeart Disease

11.0%11.0%

13.0%13.0%

37.9%37.9%

3.1%3.1%

20.2%20.2%

21.2%21.2%

13.5%13.5%

12.4%12.4%

25.8%25.8%

28.7%28.7%

20.7%20.7%

48.4%48.4%

6.8%6.8%

20.8%20.8%

28.2%28.2%

18.5%18.5%

13.9%13.9%

28.0%28.0%


Trends in PrevalenceTrends in Prevalence

Virtually all the conditions with Virtually all the conditions with large changes in prevalence are large changes in prevalence are chronicchronic..

Patients with chronic disease:Patients with chronic disease: Have long-standing, on-going and largely Have long-standing, on-going and largely

predictable medical care needspredictable medical care needs Are less likely to require hospital care Are less likely to require hospital care

compared to acutely ill episodic casescompared to acutely ill episodic cases Rely disproportionately on prescribed Rely disproportionately on prescribed

drugs, physician and other provider care.drugs, physician and other provider care.


Most of the rise in spending in Most of the rise in spending in Medicare is linked to a rise in Medicare is linked to a rise in

treated diseasetreated diseaseMedical Medical ConditionCondition

ΔΔ Treated Treated PrevalencePrevalence

ΔΔ SPC SPC PopulationPopulation

HyperlipidemiaHyperlipidemia 71.5%71.5% 13%13% 15.6%15.6%

Mental Mental DisordersDisorders

123.7%123.7% -68.0%-68.0% 44.6%44.6%

HypertensionHypertension 48.5%48.5% 21.3%21.3% 30.2%30.2%

OsteoarthritisOsteoarthritis 200.4%200.4% -150.7%-150.7% 49.9%49.9%

Pulmonary Pulmonary DisorderDisorder

10%10% 40.7%40.7% 49.6%49.6%

Back ProblemsBack Problems 48.9%48.9% 31.3%31.3% 19.8%19.8%

DiabetesDiabetes 54.3%54.3% 18.8%18.8% 26.9%26.9%

CancerCancer 17.7%17.7% 59.2%59.2% 23.1%23.1%

Heart DiseaseHeart Disease 23.4%23.4% 36.3%36.3% 40.3%40.3%

ArthritisArthritis 45.7%45.7% 21.7%21.7% 32.6%32.6%


Rise in treated prevalence also Rise in treated prevalence also linked to more aggressive linked to more aggressive

treatment of asymptomatic treatment of asymptomatic patientspatients

1988-1994 1999-2003

% with metabolic syndrome 46% 51.7%

Medicare (any adult)

% with NO Treatment 43.4% (39.1 - 47.7)31.9% (25.9 -

37.8)

Treated for

1 Condition45.1% (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)


ImplicationsImplications

Need to change how Medicare pays for Need to change how Medicare pays for health care (toward bundled services for health care (toward bundled services for chronic conditions)chronic conditions)

Need to engage beneficiaries in self-Need to engage beneficiaries in self-management through financial incentives management through financial incentives (all clinically recommended preventive (all clinically recommended preventive services free)services free)

Need to build appropriate models for Need to build appropriate models for delivering care for today’s patients, not delivering care for today’s patients, not those of 1965!those of 1965!

Documents

Academy Health Annual Meeting, Orlando, June 2007 What Accounts for the Rise in Medicare Spending? Kenneth E. Thorpe, Ph.D. Robert W. Woodruff Professor