Per Capita Medicare Inflation in the Last Decade: Unit Cost Increases Offset by Reduced Utilization
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and James N. Weinstein, DO, MS1,2,3,4
1
Microsoft Healthcare NExT, Redmond, WA, USA; 2Tuck Business School, Hanover, NH, USA; 3The Dartmouth Institute for Health Policy and Clinical Practice, Lebanon, NH, USA; 4Kellogg School of Business, Evanston, IL, USA.
J Gen Intern Med DOI: 10.1007/s11606-019-05553-y © Society of General Internal Medicine 2019
College has determined that analyses of pubD artmouth licly available data are not considered to be human subjects research (CPHS00028121). Among the commercially insured, per capita medical expenditure growth has been fueled by unit price inflation. Though attenuated by reduced per capita utilization (2011– 2017),1 unit price inflation has driven overall inflation, being substantially higher for hospital than for physician services (2007–2014).2 While per capita health care spending growth has been higher for the commercially insured than for those insured by Medicare,3 evaluation of the relative contributions of utilization and unit price inflation to overall per capita Medicare fee-for-service expenditure inflation has not been conducted. We sought to complete such an analysis.
METHODS
From the Centers for Medicare and Medicaid Services (CMS), we obtained 2007–2017 public use files for Medicare fee-forservice beneficiaries aged less than 65 years old (< 65) and 65 years old and older (65+). Those data included the number of fully enrolled Medicare Parts A & B beneficiaries and standardized care expenditures (that eliminate expenditures for graduate medical education and disproportionate share, locality pay differences, and alternative payment model differentials) disaggregated into 18 service categories.4 For each service category, we obtained the number of beneficiaries who used each service and per-beneficiary service-specific utilization rates (for longitudinal services (e.g., inpatient care categories, home health care, and hospice), including the number of days of service use). We estimated the total number of service-specific “events” (e.g., procedures or dialysis visits) for single-use services and service-specific Received August 3, 2019 Accepted October 31, 2019
“episodes” for longitudinal services by multiplying the perbeneficiary number of events or episodes by the number of beneficiaries. We divided those numbers by the servicespecific number of users to generate annual per-user servicespecific utilization estimates. We calculated the proportionate contribution of each service category to total per capita costs, and we calculated the overall compound annual inflation rate (CAIR) for each service category over the time period examined. Finally, we calculated the relative contributions to overall service-specific CAIRs of the proportion of beneficiaries using the service and the following component contributors: for single-use services, the number of events per service-user and the estimated unit cost per event; for longitudinal services, the number of episodes per service-user, the number of days per episode, and the estimated unit cost per episode d
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