American Hospital association December 2012 TrendWatch Are Medicare Patients Getting Sicker? T oday, Medicare covers more than 48 million people, and that number is growing rapidly—baby boomers are reach- for Medicare & Medicaid Services (CMS) instituted a new patient classification system to better measure the severity that adjustment appropriately separates the effect of changes in how hospitals report severity from actual changes in ing the eligibility age of 65 at the rate of of illness of Medicare patients admitted the complexity and severity of illness of 10,000 a day.1 Medicare patients exhibit a to hospitals to improve the accuracy Medicare patients.2 growing prevalence of chronic conditions of payment for this care. Seeking to This TrendWatch explores whether and risk factors for these conditions, such ensure that these changes alone did not Medicare patients are getting sicker by as obesity. This in turn is leading to a rise lead Medicare to pay more for the same examining trends in the health of the in Medicare beneficiaries’ use of health care services and patients than it would have Medicare population, the link between services and has implications for resource paid before, CMS made a downward sicker patients and increased resource use and payment policy. adjustment to hospitals’ payment rates. use, and the evidence of increasing In fiscal year (FY) 2008, the Centers Questions have been raised as to whether intensity of care in hospital settings. Medicare Severity-adjusted Diagnosis Related Groups (MS-DRGs) Coding Adjustment In FY 2008, CMS introduced a new The new system required hospitals have been under the old system, CMS patient classification system for deter- to code patients’ complications and asserted that real case mix change was mining payment for hospital inpatient comorbidities more completely. When negative—Medicare inpatients were admissions. The system, known as measured patient severity (the “case getting less sick and less complex over Medicare Severity-adjusted Diagnostic mix index”) rose during the first year time. Meanwhile, case mix rose under Related Groups (MS-DRGs), was of MS-DRG implementation, CMS the new system. To account for this designed to better measure differences needed to separate the effects of these difference in case mix, CMS applied in severity of illness across patients coding changes from real changes a series of payment adjustments that who otherwise had similar diagnoses in patient severity. Instead, CMS lowered payment rates. or were undergoing the same proce- elected to place a limit on case mix Researchers have challenged CMS’s dure. The system aimed to improve change equal to what case mix change methodology for calculating the nec- payment accuracy by better accounting would have been under the old system. essary adjustments and have suggested for the impact of complications and During the initial years of alternative methodologies to isolate comorbidities on the resources required MS-DRG implementation, using the effects of the coding adjustments for patient care.3 the standard of what case mix would from real changes in patient severity.4 Are Medicare Patients getting sicker? Rates of Obesity and Chronic Disease Are Rising Among Medicare Beneficiaries Among all Americans, Medicare bene- More seniors are obese, leading to a host of other ficiaries age 65 and older are most chronic health problems. likely to have chronic conditions— defined as diseases lasting three months Chart 1: Percentage of Seniors Who Are Obese, 1988–1994 and 2009–2010 or longer.5 About four out of five seniors are affected by a chronic condition, such ■ 1988–1994 as heart disease and cancer, hypertension, 45% ■ 2009–2010 43% stroke and diabetes.6 As the number of Medicare beneficiaries with any chronic disease has grown, so too has 30% 27% 27% the number of beneficiaries with 24% multiple chronic conditions. Research 19% indicates that, in 2008, two-thirds 13% of all Medicare beneficiaries had at least two or more chronic conditions,7 and this number continues to climb.8 Because the risk for multiple chronic diseases rises with age, the prevalence of multiple chronic conditions is 65–74 75 and older 65–74 75 and older expected to grow even more as the Medicare population ages. Men Women The rising prevalence of obesity— Source: National Institutes of Health. (2012). Older Americans 2012: Key Indicators of Well-being. a major risk factor for heart disease, some cancers, hypertension, stroke and diabetes—also has contributed to the growth in the number of seniors with Chronic disease rates are rising in the Medicare population. chronic conditions.9 The prevalence of Chart 2: Rates of Chronic Conditions Among Medicare Beneficiaries,* 2000–2009 obesity among Medicare beneficiaries has doubled since 1987;10 in 2009–2010, Diabetes Rheumatoid Arthritis/Osteoarthritis 38 percent of people age 65 and over Depression Chronic Kidney Disease were obese.11 At the same time, the rate of diabetes among people age 30% 65 years and older has gone from 18 percent in 2002 to nearly 27 percent 25% in 2010.12 20% 15% 10% 5% 2000200120022003200420052006200720082009 * Includes random 5% sample of Medicare beneficiaries. Source: CMS Chronic Condition Data Warehouse Medicare 5% Sample. Medicare Beneficiary Prevalence for Chronic Conditions for 2000 Through 2009. http://www.ccwdata.org/cs/groups/public/documents/document/wls_ucm1-000774.pdf. 2 TRENDWATCH Complexity of Caring for End-stage Renal Disease (ESRD) Patients Medicare provides health insurance Care following a kidney transplant Medicare spent an average of coverage to all Americans diagnosed includes a three- to five-day hospital $65,256 per ESRD beneficiary, with end-stage renal disease (ESRD), stay and frequent physician visits compared with $9,676 per ben- or kidney failure. Expenditures in the months and years following eficiary age 65 and older without for ESRD beneficiaries represent a surgery.14 Moreover, ESRD patients ESRD.16 In the hospital setting, disproportionate share of Medicare have a high propensity for hospital the average case mix for ESRD spending, demonstrating the high admission for other critical illnesses patients is more than 30 percent costs associated with the disease. and require more intensive care. higher than that of non-ESRD Individuals with ESRD require One study found that ESRD patients patients.17 ESRD prevalence is intensive treatment, either dialysis require admission to the intensive growing, further contributing to or a kidney transplant, both of care unit (ICU) 25 times more increased severity of illness among which demand continued care. frequently than patients without Medicare beneficiaries and rising For example, most ESRD patients ESRD.15 expenditures. Between 1999 and undergo hemodialysis at a dialysis These intensive treatments 2009, ESRD prevalence grew by facility three times a week.13 result in high spending. In 2008, 53 percent.18 The occurrence rate of ESRD, one of the highest More seniors are living with two or more cost conditions for Medicare, is ballooning. chronic conditions. Chart 3: Medicare Beneficiaries with ESRD, 1980–2010 Chart 4: Percentage of Seniors* with Two or More Chronic Conditions, 1999–2000 and 2009–2010 600,000 ■ 1999–2000 ■ 2009–2010 500,000 49% Medicare Beneficiaries 45% 43% 400,000 39% 37% 36% 300,000 200,000 100,000 0 1980 1985 1990 1995 2000 2005 2010 Total MenWomen Source: United States Renal Data System. 2012 Reference Tables. * Seniors are defined as individuals age 65 and older. Source: Freid, V., et al. (July 2012). Multiple Chronic Conditions Among Adults Aged 45 and Over: Trends Over the Past 10 Years. “If you put all of our payers together—Medicare, plus the private payers and Medicaid, mortality, “” from the field risk and severity of disease is up across all DRGs … which means we’re seeing sicker patients.”19 – Charles O’Brien, President of Sanford USD Medical Center, Sioux Falls, SD 3 Are Medicare Patients getting sicker? Despite These Trends, People Are Living Longer Even though the population has gotten In addition, the overall risk of mortality Approximately 70 percent of the improve- sicker, life expectancy has risen. This in the U.S. dropped by 60 percent from ment in survival among heart attack apparent contradiction can be attrib- 1935 to 2010.24 People who would have patients is attributable to these types of uted to breakthroughs in medicine and died of heart disease, kidney disease, cancer technological advances.27 However, with greater use of health care services. In or diabetes a generation ago are living these gains, average inpatient Medicare 2009, American life expectancy at birth longer with a better quality of life as these spending per heart attack case rose from reached 78.2 years, the longest in our diseases are now managed effectively $10,336 in 1999 to $14,009 in 2006.28 history.20 Since 2000, life expectancy through new surgical and medical inter- Medical advances also have led to signifi- has increased by 1.8 percent (or approx- ventions.25 For instance, between 2000 cant declines in cancer mortality, with imately 17 months) for the general and 2008 the age-adjusted death rates imaging and pharmaceutical innovation population.21 As a result, and in combi- for heart disease and cancer decreased accounting for more than two-thirds nation with the aging of baby boomers, by 28 percent and 12 percent, respectively.26 of the decline among cancer patients it is projected that the number of Medical and technological advances between 1996 and 2006.29 The cost of Medicare beneficiaries will more than improve outcomes, but they also often cancer care for an individual age 65 double over the next 40 years, with a raise costs. For instance, less invasive and over can reach more than $100,000 greater percentage of beneficiaries age options for cardiac care, such as cardiac in the initial year following diagnosis 85 and older.22 By 2020, the population catheterizations, coronary artery bypasses (depending on the type of cancer) and over age 85 is projected to reach 6.6 and angioplasties with stents, have can exceed $130,000 in the last year million, up from 5.5 million in 2010.23 emerged over the past few decades. of life.30 An Older, Sicker Medicare Population Requires More, Higher Intensity Care The Medicare population is living People with multiple chronic conditions use more longer with chronic disease, resulting health care resources. in an aging patient population that requires more resources. An older, Chart 5: Average Yearly Per Capita Health Spending for Individuals with Chronic sicker Medicare population uses more Conditions, 2006 health care services, including inpa- $16,000 tient and outpatient hospital care. People with chronic disease are more $14,000 likely to be hospitalized than those Average Per Capita Health Spending $12,000 without, and the resources required for each care episode are greater.31,32 This $10,000 translates into higher spending overall. $8,000 In general, overall health care spending for a person with one chronic condi- $6,000 tion is almost three times greater than $4,000 spending for someone without any chronic conditions, and spending is $2,000 about 17 times greater for someone with five or more chronic conditions.33 $0 0 1 23 5+ 4 The cost of each episode of care also Number of Chronic Conditions rises with the number of chronic Source: Anderson, G. (2010). Chronic Care: Making the Case for Ongoing Care. Johns Hopkins University and the Robert Wood Johnson conditions.34 Age is a factor as well, as Foundation. 4 TRENDWATCH older people have more health problems Costs of each episode of care rise with the number and, consequently, consume more of a beneficiary’s chronic conditions. health care.35 In 2008, per capita expend- itures were $7,626 for beneficiaries Chart 6: Average Medicare Episode Payment by Number of Chronic Conditions for age 65 to 74 compared to $13,219 Major Joint Procedure Without Major Complication* for 30-day, Fixed-length for those 85 and older.36 In addition, Episodes, 2007–2009 older beneficiaries routinely have more $28,000 comorbidities, such as certain heart and pulmonary conditions, that hos- $26,000 pitals must manage during a patient’s $24,000 stay. For instance, in 2010, nearly 18 percent of Medicare patients age 85 $22,000 and older with an inpatient hospital $20,000 stay had a comorbidity of congestive $18,000 heart failure, compared with roughly 9 percent of patients age 65 to 74.37 $16,000 Higher spending for older patients $14,000 with chronic conditions—and higher $12,000 resource use over time as the population has aged and rates of chronic disease $10,000 have risen—is in part a reflection of 0 12345678910+ increasing complexity and resource Number of Chronic Conditions intensity for hospital patients. Spending * MS-DRG 470. Source: Dobson | DaVanzo (October 2012). Medicare Payment Bundling: Insights from Claims Data and Policy Implications. for inpatient hospital care increases with the number of chronic conditions a patient has.38 About 50 percent of Overall health care spending rises with age. Medicare beneficiaries with stroke or heart failure have five or more other Chart 7: Distribution of Average Health Care Spending* Per Person by Age, 2009 chronic health conditions that need to be managed when they receive care $9,744 on an inpatient or outpatient basis.39 As a result, hospital caregivers must ensure the patient remains stable on multiple fronts. Patients with chronic kidney disease $5,511 (CKD), for instance, are very complex and require intensive, ongoing treat- ment. In addition, CKD patients share many risk factors for other conditions­— $2,739 such as old age and obesity—and $1,834 $1,695 therefore often suffer from comorbidities like cardiovascular disease and hyper- tension. These comorbidities can heighten the severity of CKD, requiring 5–17 18–24 25–44 45–6465+ that these patients receive more com- Age plex care management, and subsequently *Health care spending includes total payments from all sources (including direct payments from individuals and families, private insurance, raising costs.40 Medicare, Medicaid, and miscellaneous other sources) to hospitals, physicians, other providers (including dental care), and pharmacies; health insurance premiums are not included. Source: Kaiser Family Foundation. (May 2012). Health Care Costs: A Primer. 5 Are Medicare Patients getting sicker? Rising acuity is reflected in the Medicare patients with complex care needs are increase in the percentage of Medicare making up a greater proportion of inpatient visits. inpatient admissions that included an ICU stay.41 In addition, Medicare Chart 8: Proportion of Inpatient Visits for Disabled and Dual-eligible* Medicare beneficiaries are receiving ICU care for Beneficiaries,** 2006–2010 a greater number of days during the 32% last six months of life.42 Disabled Dual-eligible 31% In the outpatient setting, a grow- ing number of Medicare claims are for 30% observation stays.43 Observation stays 29% require providers to manage sicker 28% patients in the outpatient setting, leav- 27% ing only the most complex patients in 26% the inpatient setting. 2006 2007 2008 2009 2010 Finally, data show that more indi- *Individuals eligible for both Medicare and Medicaid. ** Based on random 5% sample of Medicare beneficiaries. viduals age 65 and older are presenting Source: Avalere Health analysis of Medicare National Claims History Standard Analytical Files. at the emergency department (ED) requiring emergent care. From 2007 to All of these trends are contributing to rising acuity 2009, the proportion of seniors who went to the ED requiring emergent levels in the inpatient setting… care increased from about 15 percent Chart 9: Health Risk Scores* for Admitted Patients, 2006–2010 to more than 17 percent.44 3.30 3.25 3.20 3.15 3.10 Conclusion 3.05 3.00 2.95 Chronic disease is rising among 2.90 Medicare patients. 2.85 2.80 The link between chronic disease 2006 2007 2008 2009 2010 and resource use is well established. *Hierarchical Condition Category Scores is a measure used by CMS for risk-adjustment in the Medicare Advantage program. That’s why it is not surprising that Source: The Moran Company Analysis of Medicare 5% Standard Analytic Files for 2006–2010 the new patient classification system (MS-DRGs)—designed to account for …as evidenced by greater use of costly resources complications and comorbidities and such as intensive care units. their associated resource use—shows a rise in patient case mix over time Chart 10: Percent of Medicare Discharges Involving Intensive Care, FY 2000–2011 relative to the old system. Policymakers 30% should carefully consider the trends of increasing acuity in the Medicare patient Percent of Discharges population as they seek changes to pay- ment policy. 25% 20% 2000200120022003200420052006200720082009 20102011 Source: The Moran Company. (2010). Issues in Measuring Documentation and Codling Change. Paper presented to the American Hospital Association, Federation of American Hospitals, and Association of American Medical Colleges. Updated data for 2010 and 2011 provided by the Moran Company. 6 TRENDWATCH Endnotes 1Centers for Medicare and Medicaid Services. (April 23, 2012). 2012 Annual Report of the 23 .S. Department of Health and Human Services: Administration on Aging. A Profile of U Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Older Americans: 2011. Insurance Trust Funds. 24 Centers for Disease Control and Prevention. (March 2012). 75 Years of Mortality in the 2 Newhouse, J. (April 11, 2011). Memo to American Hospital Association, Association of United States, 1935–2010. NCHS Data Brief: No. 88. American Medical Colleges, and Federation of American Hospitals. 25 U.S. Department of Health and Human Services. Health, United States, 2011. 3 RAND. (April 2008). Evaluation of Alternative Methods to Establish DRG Relative Weights. 26 Ibid. Prepared for the Centers for Medicare and Medicaid Services. 27 Cutler, D., et al. (2001). Is Technological Change in Medicine Worth It? Health Affairs, 4 Newhouse, J. (April 11, 2011). Memo to American Hospital Association, Association of 20(5), 11–29. American Medical Colleges, and Federation of American Hospitals; The Moran Company 28 merican Heart Association. Heart Disease and Stroke Statistics—2005 Update; A (2012). Transition to MS-DRGs: Issues in Measuring Documentation and Coding Change. American Heart Association. Heart Disease and Stroke Statistics—2010 Update. 5 nderson, G. (2010). Chronic Care: Making the Case for Ongoing Care. Johns A 29 Lichtenberg, F.R. (2010). Has Medical Innovation Reduced Cancer Mortality? Cambridge, Hopkins University and the Robert Wood Johnson Foundation; National Health Council. MA. Access at http://www.nber.org/papers/w15880. About Chronic Disease. http://www.nationalhealthcouncil.org/NHC_Files/Pdf_Files/ AboutChronicDisease.pdf. 30 National Cancer Institute. Annualized Mean Net Costs of Care by Age, Gender and Phase of Care (Per Patient). Costs in 2010 US Dollars. http://costprojections.cancer.gov/annual. 6 Centers for Disease Control and Prevention. (2011). Chronic Disease Prevention and costs.html. Health Promotion: Healthy Aging. 31 Robert Wood Johnson Foundation. (February 2010). Chronic Care: Making the Case for 7 Centers for Medicare and Medicaid Services. (2011). Chronic Conditions Among Medicare Ongoing Care. Beneficiaries. 32 obson | DaVanzo. (October 2012). Medicare Payment Bundling: Insights from Claims D 8 reid, V., et al. (July 2012). Multiple Chronic Conditions among Adults Aged 45 and Over: F Data and Policy Implications. Trends Over the Past 10 Years. 33 nderson, G. (2010). Chronic Care: Making the Case for Ongoing Care. Johns Hopkins A 9 Trust for America’s Health/Robert Wood Johnson Foundation. (September 2012). F as in University and the Robert Wood Johnson Foundation. Fat: How Obesity Threatens America’s Future. 34 obson | DaVanzo (October 2012). Medicare Payment Bundling: Insights from Claims D 10 Thorpe, K. and Howard, D. (August 2006). The Rise in Spending Among Medicare Data and Policy Implications. Beneficiaries: The Role of Chronic Disease Prevalence and Changes in Treatment Intensity. Health Affairs, 25, w378–w388. 35 artman, M., et al. (2008). U.S. Health Spending by Age, Selected Years Through 2004. H Health Affairs, 27(1), 1-12. 11 HS/NIH. (August 2012). Federal Report Details Health, Economic Status of Older H Americans. 36 Medicare Payment Advisory Commission. (June 2012). Health Care Spending and the Medicare Program. 12 Centers for Disease Control and Prevention. National Diabetes Fact Sheet, 2011 and National Diabetes Fact Sheet, 2003. 37 Avalere Health analysis of 2010 Medicare Provider Analysis and Review (MedPAR) file. 13 Medicare Payment Advisory Commission. (June 2012). A Data Book: Health Care 38 nderson, G. (2010). Chronic Care: Making the Case for Ongoing Care. Johns Hopkins A Spending and the Medicare Program. University and the Robert Wood Johnson Foundation. 14 Stanford Hospitals & Clinics. After Surgery: Returning You to Health. 39 Centers for Medicare and Medicaid Services. (2011). Chronic Conditions Among http://stanfordhospital.org/clinicsmedServices/COE/transplant/kidney/recipients/postop.html. Medicare Beneficiaries. 15 Strijack B., et al. (2009). Outcomes of Chronic Dialysis Patients Admitted to the Intensive 40 Chronic Kidney Disease Task Force. (January 2011). Addressing Chronic Kidney Disease Care Unit. Journal of the American Society of Nephrology, 20:2441-2447. in Texas. http://savekidneys.com/wp-content/uploads/2010/05/Chronic-Kidney-Disease- Report-2011.pdf. 16 Medicare Payment Advisory Commission. (June 2012). A Data Book: Health Care Spending and the Medicare Program. 41 The Moran Company. (July 12, 2012). Issues in Measuring Documentation and Coding Change. 17 HA analysis of MEDPAR, 2011 data for fee-for service patients paid under the Inpatient A Prospective Payment System in acute care hospitals. 42 Goodman, D., et al. (April 12, 2011). Trends and Variation in End-of-life Care for Medicare Beneficiaries with Severe Chronic Illness. The Dartmouth Institute for Health 18 Medicare Payment Advisory Commission. (June 2012). A Data Book: Health Care Policy and Clinical Practice. Spending and the Medicare Program. 43 Medicare Payment Advisory Commission. (March 2011). Report to Congress. 19Lubell, J. (August 9, 2010). How Sick Are We? Modern Healthcare. http://www.medpac.gov/chapters/Mar11_Ch03.pdf. 20 Centers for Disease Control and Prevention. (July 2011). Death in the United States, 2009. 44 Centers for Disease Control and Prevention. National Hospital Ambulatory Medical 21 Ibid. Care Survey: 2007 Emergency Department Summary; Centers for Disease Control 22 .S. Census Bureau. (August 2008). Projections of the Population by Selected Age U and Prevention. National Hospital Ambulatory Medical Care Survey: 2009 Emergency Groups and Sex for the United States: 2010–2050; Chronic Condition Data Warehouse. Department Summary Tables. Medicare Enrollment, 2009 by Age Group. 7 TrendWatch, produced by the American Hospital American Hospital Association Avalere Health LLC Association, highlights important trends in the Liberty Place, Suite 700 1350 Connecticut Avenue, NW hospital and health care field. 325 Seventh Street, NW Suite 900 TrendWatch — December 2012 Washington, DC 20004-2802 Washington, DC 20036 Copyright © 2012 by the American Hospital Association. 202.638.1100 202.207.1300 All Rights Reserved www.aha.org www.avalerehealth.net