The cost of chronic disease

A timely new study confirms what many observers have seen all along: Medicare is now spending more on the outpatient management of chronic diseases than on acute hospital care.

The study appeared last week in the Health Affairs journal. The authors tracked Medicare spending trends across two decades, specifically looking at data from 1987, 1997 and 2006. They estimated the prevalence of chronic disease in each of those years and further analyzed how much was spent on the 10 most expensive chronic conditions, a category that included heart disease, diabetes, cancer, arthritis, high blood pressure and elevated cholesterol.

Among their conclusions: The 10 most expensive conditions accounted for about half of the inflation-adjusted increase in Medicare spending from 1987 to 2006. As chronic disease management shifts towards the outpatient setting, hospital inpatient care has fallen as a percentage of total Medicare spending, while spending on physician office visits and prescription drugs has grown.

To anyone who’s been paying attention, none of this should come as any surprise. What’s especially interesting about this particular study is what it reveals about trends in chronic disease and chronic disease management.

Twenty years ago, hospital care for heart disease was the largest and fastest growing area of Medicare expenditures. But by 2006, heart disease had fallen to the bottom of the list of the 10 most expensive chronic conditions among the Medicare-age population. The study’s authors found this wasn’t because heart disease is becoming less common; in fact the prevalence remained the same. What apparently changed is the management of heart disease, which has evolved away from hospital inpatient care to outpatient office care, prescription drugs and home health care. And although overall Medicare spending on heart disease is still rising, the increase isn’t nearly as steep and most of the growth is concentrated in physician care, prescription drugs and home health.

Where the spending really rose was for the management of other chronic conditions, such as hypertension, diabetes and cancer. Some of this, as in the case of high blood pressure and elevated cholesterol, wasn’t necessarily because the U.S. is having an epidemic of these chronic conditions. Instead, the study’s authors explain, the prevalence of hypertension and elevated cholesterol has increased because the threshold has been lowered for treating these two conditions, a move that automatically increases the number of patients eligible for treatment.

In the case of diabetes, however, there appears to be a true increase in the incidence of the disease – not just better identification and diagnosis of these patients, the authors wrote.

Why would these trends matter? Policymakers are focusing a great deal of attention right now on how to slow the growth in health care spending, but their efforts might be misguided if they only consider the big picture. From the study:

Many Medicare reform proposals designed to slow the growth in spending would redirect costs from the government to others, such as enrollees and participating providers. The slowdown would be accomplished by reducing provider payments, increasing the age of Medicare eligibility, implementing means testing for Medicare, restricting coverage as with the Part D “doughnut hole,” and increasing copays and deductibles. These approaches are unlikely to produce long-term reductions because they fail to address the key factors driving the rise in health care spending overall and in Medicare spending, particularly for chronic diseases. Understanding these facts is essential to reaching the right policy solutions.

Kenneth Thorpe, the lead author of the study published in Health Affairs, has made a rather distinguished name for himself as an advocate for new models of health care delivery that emphasize chronic disease prevention and management. Thorpe, who’s a professor and chairman of the Department of Health Policy and Management at Emory University, has frequently spoken on the need to find better, less expensive ways to deal with chronic disease.

It would be hard for anyone to argue that Medicare spending isn’t growing at a pace that’s becoming unsustainable. The real implications of this latest study, it seems, lie not within the dollars and cents but in where the money is actually going and what it means for cost containment.

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