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Steven Lieberman Assistant Director Health and Human Resources Division

Lowering Medicare Costs: Regions or Beneficiaries?. National Health Policy Conference January 28, 2004. Steven Lieberman Assistant Director Health and Human Resources Division Congressional Budget Office. Contents. Empirical observations Potential payoffs from two “naïve” interventions

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Steven Lieberman Assistant Director Health and Human Resources Division

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  1. Lowering Medicare Costs: Regions or Beneficiaries? National Health Policy Conference January 28, 2004 Steven Lieberman Assistant Director Health and Human Resources Division Congressional Budget Office

  2. Contents • Empirical observations • Potential payoffs from two “naïve” interventions • High-cost beneficiaries • High-cost regions • Next steps • Policy questions to lower spending • Criteria for evaluating policy interventions

  3. Empirical Observations • More is not better • Patients in high-spending regions received 60 percent more care • No better quality of or access to care • If spending in all regions were lowered to levels in the lowest decile, Medicare spending would fall by 29 percent • Medicare spending is concentrated • Most expensive 5 percent of beneficiaries accounted for 47 percent of total Medicare spending during 1995-1999 • Degree of concentration is similar across HRRs • Many high spenders have persistently high spending • 18 percent of beneficiaries were in the top quartile of spenders in each year for at least two consecutive years during 1995-1999

  4. Distribution of Medicare Spending and Beneficiaries Notes: Data from a 5 percent random sample of fee-for-service (FFS) beneficiaries between 1995 and 1999.

  5. Concentration of Medicare Spending Notes: Data from a 5 percent random sample of fee-for-service (FFS) beneficiaries between 1995 and 1999. Spending reported in 1999 dollars.

  6. Distribution of Medicare Spending among HRRs Notes: Data from a 5 percent random sample of fee-for-service (FFS) beneficiaries between 1995 and 1999. Excluded are beneficiaries who could not be assigned an HRR.

  7. Persistence of Medicare Spending 60% Alive End of Year 5 Persistent 18% of Benes 57% of Costs High Cost 27% of Benes 75% of Costs 40% Dead End of Year 5 Not Persistent 9% of Benes 18% of Costs Year 1 Cohort of Beneficiaries Low Cost 73% of Benes 25% of Costs Notes: CBO analysis in “Concentration and Persistence of Expenditures among Medicare Beneficiaries.” Persistently high-cost group is defined as those who were in top 25 % of spending for at least 2 consecutive years during the 5-year period, 1995-1999.

  8. Profiles of Beneficiaries by Spending Group Notes: Data from a 5 percent random sample of fee-for-service (FFS) beneficiaries between 1995 and 1999. Spending reported in 1999 dollars.

  9. Contents • Empirical observations • Potential payoffs from two “naïve” interventions • High-cost beneficiaries • High-cost regions • Next steps • Policy questions to lower spending • Criteria for evaluating policy interventions

  10. Potential Payoffs from Targeting High-Cost Beneficiaries vs. High-Cost Regions Notes: Data from a 5 percent random sample of fee-for-service (FFS) beneficiaries between 1995 and 1999. Excluded are beneficiaries who could not be assigned an HRR.

  11. Potential Payoffs from Targeting High-Cost Beneficiaries vs. High-Cost Regions

  12. Possible Policy Interventions Possible interventions through reducing capacity, changing reimbursements and creating new programs

  13. Challenges of the High-Cost Beneficiaries Approach Generating savings from high-cost beneficiaries requires: • Identifying who is, or will be, high cost • Who survives but remains high cost? • Could interventions change cost or outcome? • Developing and implementing effective interventions • Requires achieving lower costs or improved outcomes • Should interventions be provider or patient focused? • Rigorously demonstrating net savings • Possibly use randomized control groups • Capture costs of intervention and changes in benefit spending

  14. Challenges of High-Cost Regions Approach Generating savings from high-cost HRRs requires: • Identifying who/ what will change practice patterns/ utilization • What to target? • Could interventions cause changes in cost or outcome? • Developing and implementing effective interventions • Requires achieving lower costs or improved outcomes • Where or on what should interventions be focused? • Rigorously demonstrating net savings • Possibly use randomized control groups • Capture costs of intervention and changes in benefit spending

  15. Contents • Empirical observations • Potential payoffs of two “naïve” interventions • High-cost beneficiaries • High-cost regions • Next steps • Policy questions to lower spending • Criteria for evaluating policy interventions

  16. Policy Questions to Lower Spending • How best to identify excess spending? • What interventions would reduce excess spending? • How do we evaluate results of different policy interventions?

  17. Criteria for Evaluating Policy Interventions

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