Tag Archives: Medicare Spending Trends

Antipating the Impact of the Baby Boom on Medicare

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In perusing the excellent work of the Peterson-Kaiser Health System Tracker project, we recently came across an analysis (depicted on the left, below) of Medicare spending patterns broken down by age of beneficiary. Based on 2014 data, the analysis shows how much was spent per capita in traditional Medicare fee-for-service on beneficiaries of each age. (The analysis excludes Medicare Advantage data, and also doesn’t include beneficiaries aged 65, for whom a full year of spending data wasn’t available.)

What’s interesting is how spending patterns differ across age cohorts—inpatient spending peaks at age 92 and then declines, spending on physician services peaks at age 85, skilled nursing and hospice spending ramp up quickly for much older beneficiaries. To see how these patterns might play out if applied to the Baby Boom generation, we combined the Peterson-Kaiser analysis with our earlier look at generational aging. The result is the chart on the right, below, which shows how each bucket of spending will increase over the coming 25 years given aging of the population.
 
A couple of interesting observations from this (admittedly imperfect) analysis.

First, the sheer size of the baby boom generation will drive a huge increase in Medicare spending over the next 25 years. And a full third or more of the total Medicare spend on Baby Boomers isn’t even captured here—that will come via payments to Medicare Advantage plans.

Second, inpatient care drives a huge amount of the total spend. It’s clear that an urgent priority is finding ways to shift spending from the light grey bars (inpatient) to the other segments—we need to pull forward the shift from inpatient to other settings from where it was in 2014’s population. Recall that this is traditional Medicare—strategies like accountable care organizations (ACOs) and other care management/population health reforms will be critical here.

Finally, in addition to changing the trend with innovations in care delivery models, we should expect technology and pharmaceuticals to play a role in inflecting the shape of this graph. Whether that impact will produce a net savings or a net increase in spending remains to be seen.

Shared Savings Program ACOs Reduced Medicare Spending by $1 Billion

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http://www.healthleadersmedia.com/quality/shared-savings-program-acos-reduced-medicare-spending-1-billion?spMailingID=11861186&spUserID=MTY3ODg4NTg1MzQ4S0&spJobID=1240498373&spReportId=MTI0MDQ5ODM3MwS2

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ACOs under CMS’ largest alternative payment model outperformed fee-for-service providers in quality and cost savings within the first three years of program.

According to findings reported by the Department of Health and Human Services Office of Inspector General (OIG), accountable care organizations (ACOs) participating in the Shared Savings Program are learning how to achieve greater cost savings over time. The Medicare Shared Savings Program is one of the largest alternative payment models implemented by CMS to reward providers for the quality and value of their services in order to keep patients healthy and lower costs.

The OIG’s report suggests many positive outcomes of the program, including that one-third of the ACOs that reduced their spending lowered costs enough to receive a portion of the savings. CMS data on quality measures also shows that ACOs generally improved the quality of care they provided, with a rate of 82% performance improvement on the individual quality measures within the first three years of the program. ACOs also outperformed fee-for-service providers on 81% of the quality measures.

A small portion of ACOs are reported to have gone above expectations, reducing Medicare spending by an average of $673 per beneficiary, including spending reductions for high-cost services such as inpatient hospital care and skilled nursing facility care. The OIG reports that these high-performing ACOs’ frequent use of primary care services, which can lower utilization and costs for other care, and cost reductions for services such as emergency department visits, was a factor in their cost savings. These strategies are compared to other Shared Savings Program ACOs and the national average for fee‐for‐service providers, who showed an increase in per beneficiary spending for key Medicare services.

The OIG concluded that ACOs show promise in reducing Medicare spending while also improving quality. These improvements come at a critical time, as Medicare spending is predicted to grow to $1.4 trillion by 2027. A large portion of Medicare spending has been attributed to overbilling, with the Medicare program losing more money to this error than any other program government-wide.

The two mysteries of Medicare

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The two mysteries of Medicare

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A growing proportion of Medicare beneficiaries are opting out of the government-run insurance program. They are instead choosing a private plan alternative, one of the Medicare Advantage plans. The strength of this trend defies predictions from the Congressional Budget Office, and nobody can fully explain it.

Here’s another mystery. Traditional Medicare spending growth has slowed, bucking historical trends and expectations. Though there are theories, we don’t fully know what’s causing that either.

Pinning down explanations for these two mysteries is important. Doing so could help us understand the structure and cost of Medicare in the future.