Health Trajectories and Expenditures Patterns for Medicare Beneficiaries with Accelerated Expenditures

In 2006, a quarter of Medicare beneficiaries over the age 65 saw their health care expenditures at least double in a year. Our analysis found that their health trajectories drive spending patterns. Using three years (2004-2006) of the Medicare Current Beneficiary Survey, we found that people in the top quartile for expenditures increases shared a similar socio-demographic profile with the lower quartiles but had different trajectories for developing chronic conditions, limitations with activities of daily living (ADLs), and inpatient visits. In general, beneficiaries with jumps in spending between 2005 and 2006 were healthier at baseline with fewer chronic conditions, ADLs, and inpatient claims than the lower quartiles with steadier spending. However, the odds of a person in the top quartile of skyrocketing expenditures developing two or more new ADLs in a year were twice that of a person in the lower quartiles. The odds of a person in the top quartile developing two or more new chronic conditions in a year was almost two times (1.7) the odds for a person in the lower quartiles.

This population deserves a closer look. The top quartile for expenditures increase accounted for only 10-20 percent of all Medicare spending in 2004-2005, but disproportionately represented 40 percent in 2006.

The analysis demonstrates that the scope of cost-containment strategies should expand beyond the sickest of beneficiaries to invest in prevention and care coordination for the relatively healthy. Even older adults who appear healthy should be monitored for rapid accrual of chronic conditions and functional limitations.