RWJF Content Alert - Paying for Medicare's Highest-Cost Beneficiaries

Publication Date: 
February 15, 2011

New Research Findings Counter Previous Studies About High-Cost Medicare Beneficiaries

With annual health care costs continuing to rise at unprecedented levels and the eldest baby boomers now applying for Medicare, it’s increasingly essential that the U.S. get a handle on the cost for providing care to seniors. With 25 percent of beneficiaries accounting for 85 percent of Medicare spending, identifying more efficient ways to provide high-quality care to these highest-cost beneficiaries is particularly critical. New research indicates that contrary to previous studies, the answer may lie with patient health status rather than with supply-induced demand driven by the number of area physicians and available hospital beds.

A new study funded by the Robert Wood Johnson Foundation’s Changes in Health Care Financing and Organization initiative, which is administered by AcademyHealth, found that health status was the predominant predictor of costs, and that physician, practice and other market factors were insignificant or only weakly related to the cost of care for such beneficiaries. The study, published online in Health Services Research, is based on a national sample of 1.6 million elderly, fee-for-service Medicare beneficiaries. Researchers examined the relationship between supply (i.e., number of hospital beds, physicians and other health care resources relative to the population) and demand (i.e., patient health status).

James D. Reschovsky, Ph.D., senior health researcher with the Center for Studying Health System Change, and his co-authors looked at patient-level data—rather than geographic-area data—and a much richer set of explanatory factors than previous studies to examine key patient, physician, practice and market characteristics associated with high-cost Medicare beneficiaries.

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