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Christopher Fleming

Out-Of-Pocket Payments For Health Care Rose During Past Decade;
Increase In Chronic Disease Played Key Role

Health Affairs Thematic Volume On Chronic Illness Examines
Prevention Efforts And Delivery System Innovations

Also In The Issue: Health Spending Slowed In 2007,
Driven By Smallest Increase In Spending For Rx Drugs In 45 Years

Bethesda, MD -- A rise in chronic disease, particularly among baby boomers and older adults, was a key driver of the fact that consumers spent about 40 percent more out of pocket for health care over the past 10 years, researchers report in the January/February 2009 issue of Health Affairs. The study shows that the prevalence of chronic disease in the United States has burgeoned since 1996 not just among the "oldest old" but also among people in midlife and early old age -- regardless of sex, race, ethnicity, or income. http://content.healthaffairs.org/cgi/content/abstract/28/1/15

The greatest growth in spending occurred among people with multiple chronic problems, such as diabetes and high blood pressure. This group saw more of their own dollars go toward health care over the 10-year period examined, according to the study by Kathryn Paez, senior research scientist at the Maryland-based Center for Health Policy and Research, Social and Scientific Systems, and coauthors.

According to the study, average annual out-of-pocket spending rose from $427 in 1996 to $741 in 2005. After adjustment for inflation, this represents an increase of 39.4 percent in out-of-pocket spending per person. These were costs assumed directly by the consumer, including payments for coinsurance, copayments, deductibles, and other related medical items not covered by insurance.

Drugs were the costliest out-of-pocket expenditure by far for almost all Americans. People over age 65 with multiple chronic conditions spent an annual average of $1,292 on prescription drugs in 2005, more than five times more than what they spent for office visits, the researchers found.

What's In The Issue? The study is part of a thematic Health Affairs issue on chronic illness, which now consumes three-quarters of the more than $2 trillion spent on health care in the United States. The issue was supported by grants from Eli Lilly and Company and Wyeth. http://content.healthaffairs.org/content/vol28/issue1/

The new Health Affairs volume addresses the many questions that flow from refocusing the health care system from acute to long-term conditions. Should efforts to prevent chronic illness be understood as a strategy to save money, or rather as an investment that -- like many health care interventions -- costs money yet produces better health? Can delivery system innovations, such as multidisciplinary teams and disease management programs, effectively combat chronic conditions?

Also in the issue, analysts from the Centers for Medicare & Medicaid Services (CMS) report that in 2007, national health spending grew at its lowest rate in nearly a decade, driven in large part by a slowdown in spending growth for prescription drugs.

Can Disease Management Save Money In Medicare?

David Bott and colleagues at the CMS explore Medicare's experience with disease management initiatives, and the larger lessons that can be learned. Since 1999, the CMS has launched seven initiatives involving 35 programs in 22 states to test a variety of disease management programs to help beneficiaries better manage their chronic conditions. http://content.healthaffairs.org/cgi/content/abstract/28/1/86

Collectively, these initiatives have served approximately 300,000 Medicare beneficiaries. They include six demonstration projects and the Medicare Health Support pilot program, which accounts for just over 200,000 of the beneficiaries involved.

According to Bott and colleagues, the programs have not yet on a widespread basis improved compliance with recommended care practices, produced greater satisfaction for providers or beneficiaries, or induced broad behavior change. In addition, only a few programs have yielded savings for Medicare.

"Future initiatives need to strike a rational balance between program costs and achieving savings," conclude Bott, a social science research analyst at the CMS, and coauthors. "Both the CMS and [disease management] providers must demonstrate consistent, substantial improvements if quality and value are to take precedence over costs."

In a related piece, author Sandra Foote says that the findings presented in Bott and colleagues' paper are highly generalized and that for some initiatives, data are still not complete. Foote calls for the CMS to expedite disease management program evaluations and data for external review. These programs need a new approach in the way they are developed and should include "intensified collaboration and data exchange" to speed program improvement, as well as a broader set of scientific methods than are used in clinical trials to gauge results. http://content.healthaffairs.org/cgi/content/abstract/28/1/99

"Given the urgency to improve chronic care management on a nationwide scale, a new strategy that draws on experience from the quality improvement field is more than desirable; it is an imperative," concludes Foote, the current senior vice president and principal of Capitol Health and former senior adviser, Chronic Care Improvement, in the Center for Medicare Management at the CMS.

Preventing Chronic Illness: How Should Success Be Measured?

A core truth about chronic conditions is that most are preventable, but at what cost? While prevention can bring real benefits in terms of added health and longevity, hopes that prevention will reduce medical costs are for the most part misplaced, writes Louise Russell. On the contrary, "over the past four decades, hundreds of studies have shown that prevention usually adds to medical spending," writes Russell, a research professor in the Institute for Health and a professor in the Department of Economics, both at Rutgers University. http://content.healthaffairs.org/cgi/content/abstract/28/1/42

Although that may be true, Ron Goetzel warns policymakers not to dwell on this tightly focused financial calculus alone. "Instead of debating whether prevention or treatment saves money, we should determine the most cost-effective ways to achieve improved population health," says Goetzel, a research professor at Emory University and vice president, Consulting and Applied Research, at Thomson Reuters. He notes that adopting commonsense health practices does not require expensive technology or elaborate treatment facilities, and he offers employer health promotion programs as an example of how prevention can be cost-effective. http://content.healthaffairs.org/cgi/content/abstract/28/1/37

Growth In Health Expenditures Slows In 2007;
Growth In Rx Drug Spending Is Lowest In 45 Years

National health care spending grew at its lowest rate in nearly a decade in 2007, largely as a result of slower spending on prescription drugs, according to the report published annually in Health Affairs by analysts from the National Health Statistics Group in the CMS Office of the Actuary. Health care spending grew 6.1 percent in 2007, down slightly from 6.7 percent in 2006 and the slowest rate of growth since 1998. Overall, health care spending reached $2.2 trillion, or $7,421 per person.

Although prescription drug spending slowed significantly in 2007, reaching its lowest rate of growth in 45 years, most other health care services grew at about the same rate or faster from 2006 to 2007, the government said. Health spending growth overall outpaced the slowing economy and consumed a larger portion of gross domestic product in 2007, reaching 16.2 percent, up from 16 percent in 2006.

The slowdown in the rate of growth for prescription drug spending contributed to more than half of the overall deceleration of growth in national health spending. Spending for prescription drugs grew 4.9 percent in 2007 to $227.5 billion, down from 8.6 percent in 2006, and the slowest rate of growth since 1963. The CMS analysts attribute the drop to three key factors: an increase in the dispensing rate for cheaper generic medications; slower overall growth in prescription drug prices; and increased concerns about the safety of certain prescription drugs influenced by a larger number of "black-box" warnings from the Food and Drug Administration (FDA) in 2007.


Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


©2009 Project HOPE–The People-to-People Health Foundation, Inc.