NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Challenges in Controlling Medicare Spending: Treating Highly Complex Patients

Thomas MaCurdy, Jay Bhattacharya

Chapter in NBER book Insights in the Economics of Aging (2017), David A. Wise, editor (p. 259 - 281)
Conference held April 30-May 2, 2015
Published in March 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series - The Economics of Aging

Complex patients with many comorbid conditions are among the highest-cost users of Medicare, and they constitute an important source of growth in Medicare expenditures. This paper analyzes the universe of 2009 Medicare claims to characterize the complexity of patients with multiple comorbid conditions. The analysis finds that such patients cannot be placed into a small number of clinical bins; instead, the number of different combinations of comorbid conditions is staggeringly large and there are often very few patients with any particular combination of conditions. Furthermore, Medicare expenditures on patients grow non-linearly with the number of comorbid conditions afflicting patients. The results have important implications for existing risk adjustment methods used by Medicare, which do not sufficiently account for the way interactions among comorbid conditions tend to increase costs. Finally, the results suggest that disease management and care coordination programs will face a difficult challenge in coping with the heterogeneity of patient health conditions.

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