Large increases in spending on postacute care in Medicare point to the potential for cost savings in these settings

Abstract

Identifying policies that will cut or constrain US health care spending and spending growth dominates reform efforts, yet little is known about whether the drivers of spending levels and of spending growth are the same. Policies that produce a one-time reduction in the level of spending, for example by making hospitals more efficient, may do little to reduce subsequent annual spending growth. To identify factors causing health care spending to grow the fastest, we focused on three conditions in the Medicare population: heart attacks, congestive heart failure, and hip fractures. We found that spending on postacute care-long-term hospital care, rehabilitation care, and skilled nursing facility care--was the fastest growing major spending category and accounted for a large portion of spending growth in 1994-2009. During that period average spending for postacute care doubled for patients with hip fractures, more than doubled for those with congestive heart failure, and more than tripled for those with heart attacks. We conclude that policies aimed at controlling acute care spending, such as bundled payments for short-term hospital spending and physician services, are likely to be more effective if they include postacute care, as is currently being tested under Medicare's Bundled Payment for Care Improvement Initiative.

Keywords: Cost Of Health Care; Health Economics; Health Spending; Medicare.

Exhibit 1

Medicare Cost Per Heart Attack Episode At 30 And 365 Days, By Type Of Care, 1994–2010 SOURCE Authors’ analysis of Medicare claims data, 1993–2010. NOTES The shorter bars indicate 30-day costs, and the longer bars 365-day costs. Costs were risk-adjusted for age, race, sex, and Hierarchical Condition Categories aggregated into seventeen comorbidity groups.

Exhibit 2

Medicare Cost Per Congestive Heart Failure Episode At 30 And 365 Days, By Type Of Care, 1994–2010 SOURCE Authors’ analysis of Medicare claims data, 1993–2010. NOTES The shorter bars indicate 30-day costs, and the longer bars 365-day costs. Costs were risk-adjusted for age, race, sex, and Hierarchical Condition Categories aggregated into seventeen comorbidity groups.

Exhibit 3

Medicare Cost Per Hip Fracture Episode At 30 And 365 Days, By Type Of Care, 1994–2010 SOURCE Authors’ analysis of Medicare claims data, 1993–2010. NOTES The shorter bars indicate 30-day costs, and the longer bars 365-day costs. Costs were risk-adjusted for age, race, sex, and Hierarchical Condition Categories aggregated into seventeen comorbidity groups.