Medicare Recipients Live Longer and Their Care Costs Less … For Now

On its 50th birthday, Medicare is the one giving the gifts. According to a recent study published in the Journal of the American Medical Association (JAMA), older Americans who rely on Medicare live longer than they used to, and spend less time in the hospital. Also, the cost of a typical hospital stay has decreased in the last 15 years.

Dr. Harlan Krumholz, the lead researcher from Yale University, told NPR that “The results were rather remarkable. We found jaw-dropping improvements in almost every area that we looked at.”

His team’s goal was to determine if the effort expended by providers and government administrators to make the delivery of health care more efficient had borne fruit. They reviewed the health data of 60 million older Americans covered by traditional Medicare between 1999 and 2013. During those years, mortality rates dropped steadily, and people were much less likely to end up in the hospital.

“If the rates had stayed the same in 2013 as they had been in 1999, we would have seen almost 3.5 million more hospitalizations in 2013,” Krumholz told NPR. “People who were being hospitalized were having much better outcomes after the hospitalization. They had a much better chance of survival.”

Average costs associated with a hospital stay also dropped, from $3,290 to $2,801 (adjusted for inflation) over the 15-year period for patients in the traditional Medicare program. The numbers for Medicare Advantage, the managed care alternative to Medicare were not crunched.

If you think the recession was responsible for the cost-containment, economist Craig Garthwaite from the Kellogg School of Management at Northwestern University would disagree. He called the recession’s role minor, attributing at least some of the good news to the fact that the feds spend less money reimbursing hospitals and doctors to treat Medicare patients.

“That’s an easy way to get control of medical spending in Medicare,” he told NPR, then sounded a sour note by adding, “It’s just not something we can do in the private market, and we have to worry about how sustainable it is for the Medicare program overall.”

But the focus at this point should remain on the outcomes of spending less: They show that people did not receive a lower quality of care as their cost for it dropped.

Krumholz said the improvement was due to several factors, from prevention programs to advances in medical care. He said some of the savings also were realized by shifting medical care from hospitals to less expensive outpatient facilities.

But everyone – patients, providers, public servants – would do well to keep in mind that Medicare still operates at a slight deficit, although the situation is improving. The latest projections are that its trust fund will remain solvent through 2030, but adjustments must be made to maintain the program’s financial good health after that.

Among the elephants in the cost-containment room, Garthwaite reminded, is the escalating cost of drugs. “Some [new cancer] products,” he said, “are providing only a few months of life for several hundred thousand dollars.” And how do you make difficult treatment decisions in such fraught circumstances?

As NPR noted, “Joseph Antos, an economist in health policy at the American Enterprise Institute, agrees that the good news from the Yale study doesn’t assure a rosy future. He’s concerned about the financial health of Medicare if, for example, an effective drug for Alzheimer’s disease is developed.

‘I would argue that if anybody came up with an effective treatment for Alzheimer’s today, that treatment would be hailed as a major breakthrough and we wouldn’t be looking at the cost,’ Antos says.”

So scientific advancements could spell financial regression, breaking the positive pattern the Yale researchers documented over the past 15 years, “where improving health has actually helped drive down the cost of medical care,” said NPR.

Given that the wave of baby boomers is now cresting into retirement, bringing more 65-year-olds to Medicare, the overall cost of the program rises, even if the average cost per illness or hospitalization falls. It’s nice that we’re living longer, but that also means we’ll use Medicare longer than the last two generations did.

Happy birthday, Medicare; may you (and we) have many happy returns.