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Medical Innovations Will Result In Better Health And Longer Life, But Will Increase, Not Decrease, Elderly Spending

Curing Any One Disease Won’t Dramatically Affect Future Medicare Costs, Although Obesity May Be The Disease Exception To The Rule

 

BETHESDA, MD — What impact will advances in biomedicine and technology have on health and spending for the elderly in the future? New data, released today by the journal Health Affairs, reveal that many of the most promising medical innovations will result in better health and longer life, but they will increase, not decrease, Medicare spending. Researchers also predict that curing any one particular disease won’t save Medicare much money, with one important exception: Eliminating obesity could potentially lower costs.

“Curing any one disease will make the elderly live longer and in better health—and this has great value to society—but it also means they accumulate more health care spending over a lifetime. That offsets the savings of being healthier,” said Dana P. Goldman, PhD, corporate chair and director of health economics at RAND in Santa Monica, California.

Under current projections, Medicare spending will rise from 2.6 percent of gross domestic product (GDP) today to 9.2 percent in 2050. Demographics will have a large impact as the first wave of baby boomers turns 65 in 2010. Goldman led a team of economists and physicians from RAND, Stanford University, and the VA [Department of Veterans Affairs] Greater Los Angeles Healthcare System to explore beyond the established, current projections, and to see how changes in medical technology, disease, and disability would affect future health spending for the elderly. The researchers developed the Future Elderly Model (FEM), a demographic and economic simulation model, to help them predict future costs and health status for the elderly. The data were published today in a series of six articles and seven accompanying Perspectives in a Health Affairs Web Exclusive.

“The challenge for policymakers is to understand and manage future Medicare spending. This in-depth analysis will help them chart direction for the future,” said John K. Iglehart, founding editor of Health Affairs.

In the lead article, “Consequences of Health Trends and Medical Innovation for the Future Elderly,” Goldman and colleagues looked at advances in cardiovascular disease, cancer and the biology of aging, and neurological disease to assess how innovations affected spending and life years saved over the period 2002–2030. Some technologies would be extremely expensive. For example, expanding the use of implantable cardioverter defibrillators (ICDs) to half of elderly patients with new cases of heart failure or heart attack would result in approximately 550,000 procedures annually in 2030, with total treatment costs of $27 billion measured in 2005 dollars.

Other technologies could have modest costs per additional life year, but could increase health care spending substantially. For example, the biomedical research community is actively seeking anti-aging compounds. Such a compound would increase health care spending by 14 percent in 2030 because, if the compound had been taken by healthy beneficiaries starting in 2002, there would be 13 million more Medicare beneficiaries in 2030.

However, researchers argue, the cost per additional year of life is well worth it—only $11,000 in 2005 dollars. And if the compound keeps people alive in very poor states of health, total health care spending in 2030 would be 70 percent higher, because there would be more elderly people in poor health, according to Goldman and colleagues. Yet even in this case, the cost per additional life year of $38,000 is still relatively modest.

In an accompanying Perspective, Harvard University’s David M. Cutler takes a more optimistic view for Medicare’s future. Taking into account information technology and other health improvement advances not included in the researchers’ analysis, Cutler writes: “My forecast about medical spending is rosier than the FEM model suggests. The technological changes that the RAND authors consider will likely come to pass, and they will drive up Medicare spending (often with good value). But there is enormous potential for cost savings as well, which we have the capacity to realize. One can be an optimist even when the storm clouds are gathering.”

In the article “The Lifetime Burden of Chronic Disease among the Elderly,” economist Geoffrey F. Joyce and colleagues studied seven chronic conditions: stroke, chronic obstructive pulmonary disease (COPD), hypertension, coronary heart disease, cancer, diabetes, and acute myocardial infarction. Cumulative health care spending is only modestly higher for those with chronic diseases at age 65, ranging from about $5,000 to $18,000 (2005 dollars), because the chronically ill live fewer years. Annual Medicare expenses increase by about $750 to $2,000 for people with a serious chronic illness at age 65, while cumulative Medicare expenses increase by $2,500 to $15,000 across the seven chronic conditions studied.

Curing Obesity Could Translate Into Significant Savings For Medicare

Obesity could prove to play a large role in Medicare spending in the future, according to economist Darius N. Lakdawalla and colleagues in the article “The Health and Cost Consequences of Obesity among the Future Elderly.” Using the FEM, the authors contend that if obesity is shown to be responsible for the health differences between those who are obese and those who are not, preventing or curing obesity in any one person would return that person’s health care spending level to that of a person of normal weight. Given the growing number of obese Americans, the resulting savings to Medicare could be substantial.

How different are the costs of treating the obese elderly versus the nonobese? An obese 70-year-old incurs $38,000 in additional medical costs in old age compared with costs for a nonobese peer. And although obese 70-year-olds will live as long as those of normal weight, they will spend 40 percent more time disabled than their nonobese counterparts. Lakdawalla and his colleagues argue that the effects of disability from obesity, rather than increased spending, might be the more important component of the social burden of obesity.

Medicare will also spend about 34 percent more on an obese person than on someone of normal weight, and obesity may cost Medicare more to treat than other diseases, because higher costs are not offset by reduced longevity, according to the study. Beginning at age 70, an obese person will cost Medicare about $149,000, the highest level of any group. In addition, Medicare spending on an obese person is 20 percent higher than for the next closest group, the overweight, and 35 percent higher than spending on a person of normal weight. Medicare could experience considerable financial burden from the increase in obesity nationwide, spending about $38,000 more over the lifetime of an obese 70-year-old than it will spend on a beneficiary of similar age and normal weight.

Three additional articles, in which researchers used the FEM for all or some of their research, round out the Health Affairs Web Exclusive collection. In “Disability and Health Care Spending among Medicare Beneficiaries,” lead author Michael E. Chernew of the University of Michigan School of Public Health projects that the cost savings associated with improved disability rates will not dramatically slow Medicare spending in the long run.

In “Technological Advances in Cancer and Future Spending by the Elderly,” lead author Jayanta Bhattacharya of Stanford University finds that no scenario holds major promise for guaranteeing the future financial health of Medicare. And in “Identifying Potential Health Care Innovations for the Future Elderly,” lead author Paul G. Shekelle evaluated innovations in cardiovascular disease, cancer, the biology of aging, and neurological disease and found that many innovations have the potential to greatly affect the costs and outcomes of health care.

This series of articles was funded in part by the National Institute on Aging, and the John A. Hartford Foundation.


The articles can be read at http://content.healthaffairs.org/cgi/content/full/hlthaff.w5.r1/DC2.

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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. The abstracts of all articles are free in perpetuity. Web Exclusives are supported in part by a grant from the Commonwealth Fund.


©2005 Project HOPE–The People-to-People Health Foundation, Inc.