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Medicare End-of-Life Spending

By July 20, 2016Commentary

The Kaiser Family Foundation takes a look at Medicare’s spending for beneficiaries at the end of their lives, revealing some interesting trends.  (KFF Brief)   2.6 million people died in the US in 2014, the year the report’s data comes from, and 2.1 million or around 80%, were on Medicare at the time.  Most of these people were quite old–over 80.  Around 25% of all Medicare expenditures for beneficiaries over 65 is accounted for in the last year of the beneficiaries’ life (this data all only represents the FFS arm of the program).  These decedents had lots of hypertension, heart disease, chronic kidney disease, Alzheimer’s and diabetes.  Around 17% had cancer.  Spending for a beneficiary who died sometime in 2014 averaged $34,529 compared to only $9121 for those who lived the entire year.  The gap in the relative amount of spending on those who died and who didn’t has actually decreased in the last few years, which may reflect more younger beneficiaries, longer life expectancies or better control of spending at the end-of-life.  The rate of growth in per capita spending on beneficiaries who died has also been slower than the growth rate in spending for those who continue to live.

The higher average spending on beneficiaries who die is largely driven by inpatient hospital costs.  In 2014, this was $17,574 for decedents and only $2497 for survivors.  As might be expected there was also much higher spending for post-acute care like skilled nursing facilities, hospice care and home health care.  Inpatient care represented half of spending for decedents but only 27% for survivors.  Some parts of Medicare cover people under 65 and when those people died spending in their last year of life was even higher, averaging $41,950.  Many of these people are dually eligible and truly disabled.  Their greater spending was driven by even higher inpatient hospital use.  Among those over 65 who died, their last year of spending was highest for those who died in their early 70s and declined thereafter.  For survivors over age 65, average spending continued to rise each year through 2014.  It appears that if you life long enough you are less likely to have an acute episode requiring hospitalization before you die, but you are more likely to use hospice near the end of your life.

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