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Medicare Spending Slowdown

By March 15, 2019Commentary

The Medicare eligible population is increasing rapidly, adding to pressures on the federal budget.  But per-person spending growth in the program has slowed over the last couple of decades, which may simply be due to the influx of younger, healthier beneficiaries or may be due to other actions taken to restrain utilization and reimbursement, or to better health care and treatments.  A study in Health Affairs looks at possible causes of the slowdown.   (HA Article)   From 1992 to 2004 per-beneficiary spending rose 3.8% annually after adjustment for inflation; since 2005 that rate has been 1.1%.  The authors looked at the trend in spending for 78 clinical conditions over 1999 to 2012.  (Again, you can’t get more recent data than that?)  The population studied does not include Medicare Advantage enrollees, although the authors attempted some adjustment for that.  Actual cost would likely have been lower with the inclusion of that population.  Some complicated work was done for people with multiple diseases or conditions to try to assign spending to each condition.  Good luck with that.  Although the demographics of the Medicare population did change over the time period, especially with regard to age, those changes did not appear related to the reduction in spending increases.  Spending rises declined for every major category of spending, with the largest contribution from reduction in trend of hospital inpatient and physician services.

By disease the greatest reduction was seen in cardiovascular diseases, which is likely a testament to the power of statins and other medications in preventing significant events in those diseases.  There were also significant reductions in dementia, renal diseases, blood disorders, and preventive care.  Conditions with master spending growth included vaccinations and screenings, respiratory diseases, cancer and endocrine diseases.  The very large reduction in cardiovascular spending was largely due to ischemic heart disease and hypertension.  This suggests that all the efforts to reduce and control risk factors, primarily through drugs, have paid off, particularly as several of the drugs have become generics.  Both a decline in prevalence of disease and spending per case contributed to the reduced spending.  Payment reductions accounted for about 12% of trend reduction.  The findings indicate that if we can develop treatments that significantly change disease processes and outcomes, and those treatments don’t cost too much, that can be a powerful method to reduce health spending, better than relying on reimbursement cuts.

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