Is Medicare on the Mend?

A buoyantly optimistic Paul Krugman proclaimed recently that Medicare’s woes are over—after a long period of seemingly relentlessly rising costs, costs that were rising so fast that they were clearly the major threat to the federal budget, Medicare per beneficiary expenditures actually fell last year. Economics guru and NY Times editorialist Krugman argues that the good news cannot simply be attributed to the recession because Medicare is a government program and therefore recession-proof. Now it’s dangerous to take issue with a force such as Krugman.  But I want to at least raise the possibility that Medicare expenditures are not immune to the economic downturn because of the large amount of money that Medicare beneficiaries pay out of pocket for health care. And if a patient doesn’t get a drug prescription filled, for example, because his co-pay is too high, then Medicare does not have to pay for that drug, and expenditures fall. In this vein, a report released in July by the Henry J. Kaiser Family Foundation, “How much is enough? Out-of-pocket spending among Medicare beneficiaries: a chartbook” is very sobering.

The main findings of the report (see chart in previous post) are that fee-for-service Medicare recipients spent an average of $4734 out of pocket for health care in 2010, up from $3253 in 2000--a 44% increase. Most of that spending is by those age 85 or older: they spent an average of $5962 out of pocket compared to only $1926 for those ages 65-74.  And older people with 3 or more “ADL deficits,” or difficulties carrying out basic daily activities, spent a mind-boggling $9200 on health care, mainly on services. Out of pocket spending went to items such as Medicare premiums, other supplementary insurance, and long term care. In addition, 11% went to paying for prescription drugs as Medicare Part D has evolved since its inception to include more and more cost shifting to patients.

Interestingly, my colleagues at the Harvard Pilgrim Health Care Institute, just published a study in Health Affairs in which they present data indicating that older patients are increasingly skipping pills, taking less than the prescribed doses of medicines, or failing to fill prescriptions altogether in order to save money: among patients with 4 or more chronic conditions, they found that while 14.9% experienced “cost-related medication nonadherence” in 2005, this rate fell steadily until it reached 10.2% in 2009, and then it began rising again, reaching 10.8% in 2011.

So it is entirely possible that the fall in Medicare costs reflects at least in part decisions made by patients to forgo particular pricey interventions. The result, predictably, would be savings to the entire Medicare program. Now whether such choices made by patients adversely affects their health is another matter.  The Health Affairs study assumes that non-adherence to medications is likely to lead to adverse health outcomes including worth health states and increased rates of hospitalization, especially in older individuals with multiple chronic conditions. They base their assumption on studies from the 1990s, principally conducted in the mentally ill and in Medicaid patients, that in fact showed that when patients did not take their medicines as prescribed, their clinical condition deteriorated. Whether the same would hold true for chronically ill older patients today is not so clear: there is ample evidence that older individuals with multimorbidity are at increased risk of adverse drug reactions the more medicines they take and that following the guidelines for all the diseases they have can cause falling, fainting, confusion, and other problems. Nonetheless, it would be preferable for physicians to make wiser prescribing decisions based on an understanding of physiology rather than leaving it to patients to decide which medications to forgo based on cost.

Medicare expenditures are falling and it behooves us to understand exactly why and to evaluate the consequences. Whether the cost saving strategies of the Affordable Care Act are responsible, and whether the particular decreases in costs have had any effect on patients’ health and well-being, is yet to be determined.