End of Life

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Why is end-of-life spending so high?

April 25, 2012 in Hospitals, International Health Care Systems | 3 comments

The answer is because using more intensive services does reduce mortality.

This is the finding of a recent JAMA paper. After controlling for patient case mix, the authors examine variation in hospital spending in the last year of a patient’s life. The authors note that “Higher-spending hospitals differed in many ways, such as greater use of evidence-based care, skilled nursing and critical care staff, more intensive inpatient specialist services, and high technology, all of which are more expensive.” Higher spending hospitals (on a per patient basis) tend to be hospitals with a larger volume of patients. They are also more likely to “be located in urban areas; be associated with regional cancer centers; have on-site computed tomography and magnetic resonance imaging scanners, cardiac catheterization laboratories, and cardiac surgery capability; and be early adopters of critical care response teams.”

Higher spending hospitals had overall reduced mortality rates for four disease considered. “In the highest- vs lowest-spending hospitals, respectively, the age- and sex-adjusted 30-day mortality rate was 12.7% vs 12.8% for AMI, 10.2% vs 12.4% for CHF, 7.7% vs 9.7% for hip fracture, and 3.3% vs 3.9% for colon cancer.”

One reason for these differences could be that high-spending areas could be located in richer areas where mortality rates are lower for a variety of reasons. Although unobserved heterogeneity in patient case mix is a problem with any study, the authors do stratify their results based on neighborhood income and find similar results.

The relevance of this study to the United States, however, is hard to determine. Although high spending hospitals decrease mortality in Canada, almost all hospitals in the U.S. would be considered high spending by Canadian standards. Thus, it is unclear that marginal returns to additional spending in the U.S. would be similar to what was observed in this study. In fact, studies in the United States by Barnato et al. and Goodman et al. show “…a positive association between spending and outcomes among low-intensity hospitals or regions but no association at average or higher intensity levels.”
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The Value of End-of-Life Medical Care

March 8, 2010 in Economics - General | No comments

Some estimates claim that one-quarter of life-time spending on medical care occurs in the last year of an individual’s life.  Conventional wisdom says this is inefficient, but a paper by Philipson, Becker, Goldman and Murphy (2010) disagrees.  Individuals at the end of their life place very high value on terminal medical care for the following reasons:

  1. If resources have no value when dead, a self-interested individual would be willing to forego his entire wealth to extend his life.
  2. The preservation of hope raises the value of life.  The authors claim that if a patient is given a death sentence in 6 months, he values those 6 months less than if he knew he would live after that.
  3. The social value of terminal care is often greater than the private value.  Adult children (hopefully) places a high value on extending the life of their elderly parents.
  4. The value of terminal care may be the same regardless of a patient’s quality of life.  QALY estimates of the value of life underestimate the utility the elderly receive from being alive, even in a very frail state.

Source: Philipson, Becker, Goldman and Murphy (2010) Terminal Care and The Value of Life Near Its End, NBER Working Paper #15649.

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Does Hospice Care Reduce Medicare’s cost for end-of-life care?

August 27, 2009 in Medicaid/Medicare | No comments

Historically, Medicare recipients in their final year of life generated about six times the expenditures of the average surviving Medicare enrollee and accounted for almost 30 percent of total program spending. However, in the late 1980s, a confluence of two forces helped increase the use of hospice care among Medicare beneficiaries.

First, in 1984, Medicare instituted the Prospective Payment System (PPS). Hospitals began receiving fixed payments for each admission based on patient diagnosis (DRG). Thus, hospitals had an incentive to move long-term care patients to alternative facilities, such as hospices. Secondly, in 1988, the Duggan v. Bowen court ruling held that the HCFA (now CMS) had to expend their interpretation of home health benefits. Soon after, Medicare began to cover more hospice and home health services. Because of these two forces, the supply of home health services and hospices boomed.

Did the rise in popularity of hospice decrease Medicare’s end-of-life expenditures? A paper by Garber, MaCurdy and McClellan find that the answer is no.

Hospice and home health care did substitute for some inpatient hospital services. Between 1988 and 1995, “the percentage of Medicare recipients who died in an acute hospital fell from about 42 percent to less than 35 percent. The percentage who died without any Medicare-covered services fell much more dramatically, from about 40 percent in 1988 to about 25 percent in 1995.” Hospice care rose from about 2% in 1988 to 10% in 1995.

This growth in the utilization of hospice care was strongest in patients who had chronic diseases such as lung cancer. Predictably, individuals who died of sudden illnesses such as acute myocardial infarction (AMI) or hemorrhagic stroke did not increase their use of hospice care.

However, although the hospice care did substitute for inpatient hospital care expenditures for end-of-life medical continued to increased. “…per-decedent total expenditures in the final month of life rose from about $5,400 in 1988 to $7400 in 1995, expressed in 1995 dollars.” Even though inpatient hospital utilization decreased at the end of life, the cost of this care increased dramatically. For instance, for patients who died of AMI—where inpatient hospitalization at the end of life varied little over time—the cost of care in the final month of life rose by nearly 50 percent in real terms between 1988 and 1995.

In summary, although hospice utilization increased and inpatient hospital care decreased, “the simultaneous rise in the use of hospice and other services, however, meant that the number of days that patients received Medicare-covered services rose between 1988 and 1995.” the net effect of these changes in utilization was an increase in monthly Medicare expenditures before death, rising from about $5,500 in 1988 to more than $7,000 in 1995 (in 1995 dollars).

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