Home Health Medicare Spending Steady, Hospice Soars

While younger Medicare beneficiaries are going to the hospital less frequently, older beneficiaries are spending more on skilled nursing and hospice care, leading to some dramatic changes in how the government insurance program for older adults distributes its payments.

Between 1999 and 2012, the age at which Medicare spending per beneficiary was highest increased from 89 to 97, according to a recent working paper from the Congressional Budget Office.

“More rapid growth in spending on care provided in skilled nursing facilities and hospice care—services that are more widely used by older beneficiaries—than in spending on other Medicare services contributed to the faster growth in spending per beneficiary among the older groups; that growth also accounted for the increase in the age for which Medicare spending per
beneficiary was highest,” the paper’s abstract states.

To calculate their estimates, the researchers looked at Master Beneficiary Summary File information for Medicare fee-for-service claims.

Spending per beneficiary did slow for the 65- to 74-year-old age cohort during the period in question, the researchers determined. They attributed that to a reduction in use of acute inpatient hospital care. In 1999, nearly 50% of Medicare spending for the 65-74 group went toward hospital care; by 2012, that had dropped to about 37%.

Source: Changes in Medicare Spending per Beneficiary by Age

Source: Changes in Medicare Spending per Beneficiary by Age

During that same time period, hospice use skyrocketed among the oldest Medicare beneficiaries. It accounted for 4.2% of Medicare payments among 95- to 105-year-olds in 1999, and 18.6% in 2012.

Home health payments stayed relatively steady among the oldest old, going from 9.4% in 1999 to 9.3% in 2012.

Overall, home health spending per beneficiary grew from 5.1% of all spending in 1999 to 5.7% in 2012. Hospice spending grew from 1.4% to 3.9%.

The data may be useful to policymakers as they weigh how to keep Medicare solvent as the massive Baby Boom generation ages, and particularly as these seniors begin to enter age into the highest-spending categories, the authors wrote.

“After rising from 1.9 percent of GDP in 2000 to 2.9 percent of GDP in 2014, net Medicare expenditures under current law are projected to rise to 3.6 percent of GDP by 2025 and increase further in subsequent years,” they wrote. “Such growth over the long term probably cannot be sustained without reducing other federal spending, raising tax revenues above their historical levels relative to GDP, or adopting a combination of those approaches.”

Written by Tim Mullaney