Understanding Medicare: Tackling End-of-Life Costs

Published on
October 8, 2012

For most politicians dealing with Medicare reform, end-of-life cost is one issue that dare not speak its name.

It's more toxic in the public arena than the idea of a radical Medicare overhaul, and it brings up images of the fictional "death panels" and "rationing." Despite being the third rail of Medicare reform, it simply can't be avoided if policymakers are serious about reducing overall costs. Yet addressing these expenses involves a larger societal debate that extends beyond Capitol Hill into every American household. 

There's little question that end-of-life care consumes a disproportionate amount of Medicare spending, accounting for up to 25 percent of all Medicare expenditures. Amy Kelley, a professor at the Mt. Sinai School of Medicine, found that out-of-pocket expenses for beneficiaries averaged $38,688 during the last five years of life. Median spending for recipients is about $23,000. The top quarter of those surveyed (using data from the University of Michigan Health and Retirement Study) spent an average of $102,000. 

Some Medicare beneficiaries don’t purchase Medicare Supplement Insurance (Medigap), so they are responsible for deductibles and co-payments, which can spiral during the last years of life, and Medicare provides no limit on out-of-pocket spending. So patients often tap all of their assets just to pay their share of the bills: "Twenty-five percent spent all remaining assets, including any housing or real estate they might own,” Dr. Kelley said. “The frequency tended to be lower among Medicare beneficiaries who were married; higher among those who were single."

Dr. Kelley also found that dementia was the most expensive malady to treat. Since Medicare doesn't cover custodial nursing care—and only a limited amount of skilled institutional nursing—families are often forced to spend their life savings to cover the bills. And once they do that, they often then rely upon Medicaid to pay for the remaining expenditures. In many cases, beneficiaries will deliberately spend down their savings in creative ways in order to qualify for Medicaid so nursing care will be covered.

Medicaid, the health program for the poor, was never designed to cover nursing home care, but has become a last-resort financing pool for those families that become impoverished by end-of-life care. This growing cost will escalate as the incidence of Alzheimer's disease grows and as baby boomers get older. 

Congress thus far has fumbled the long-term care issue. A provision called CLASS was inserted into the Affordable Care Act (ACA) to provide subsidized long-term care insurance, although it was later removed by the Obama administration after cost estimates were run and the expense of the program was found to be unsustainable. 

Due to demographic and provider cost trends, end-of-life costs show no sign of flattening out or decreasing. Nursing home care expenses have always been on an upward curve and few people buy long-term care insurance. And although there have been several new drugs marketed to treat early-stage Alzheimer's, there have been no significant breakthroughs. Dementia remains one of the most difficult and costly maladies to treat.

It's difficult to discuss end-of-life measures without considering nursing home expenses, which average $200 a day for a median semiprivate room—that's $73,000 a year—according to national survey by Genworth, an insurance company.

Other Lower-cost Alternatives

One approach to reducing end-of-life costs is to move patients from nursing homes or acute care hospitals into hospice or palliative care settings, where the emphasis is no longer on curative treatment but on making the patient comfortable. While there's some research to suggest that overall costs can be lowered, the results are mixed.

In a piece published by the Archives of Internal Medicine last year, a research team noted some savings when cancer patients were shifted from treatment to hospice. That's because they were less 20 percent likely to receive high-intensity care, visit the emergency room or undergo extensive tests. 

Yet while the use of hospice care is growing—from 19 percent in 2000 to nearly 40 percent in 2007—that doesn't always translate to less intensive hospital care, a Duke University team found. Rates of hospitalization, the Duke researchers found, remained at 80 percent for those patients in the last year of life. 

Savings also vary widely depending upon the disease being treated and when hospice care is offered. If patients are only moved out of acute care in the last weeks of life, the savings are likely to be minimal, researchers say.

"While we are seeing increasing use of hospice, it doesn't seem to really be substituting for a lot of the institutional care, and there's a significant proportion of patients who are in hospice for a very short period," Dr. Kathleen Unroe, of the Duke study, told Reuters Health. "When people are referred to hospice very late, it's difficult for hospice services to prevent hospitalization and for people really to get the full benefit."

Changing the Institutional Bias

Part of the reason that end-life-care is still so expensive is an institutional bias toward treatment—no matter what the cost or outcome—versus helping patients die in comfort and with dignity. Many hospitals don't offer full palliative or hospice programs, and providers may not be trained to help families review the options.            

According to the Robert Wood Johnson Foundation, which has studied the issue extensively and has offered several programs on the subject, end-of-life care education and programs have dramatically expanded only in the past 20 years. "The number of hospitals with palliative care programs has increased from fewer than 25 in the mid 1990s to more than 1,200 in 2006 with almost 90 percent of medical schools now requiring instructional hours in palliative care." 

Hospice and palliative care expansion, though, faces an uphill battle for acceptance, because the lion's share of Medicare is still focused on compensating providers for medical treatments, tests and hospitalization oriented toward a cure. Medicare will only offer hospice care reimbursement when patients are certified by a doctor as having only six months or less to live. Only one hospice consultation is covered and you can only enroll in a Medicare-approved program. Room and board for home or institutional care is not covered, so this is a constricted benefit that passes most of the cost along to beneficiaries.

Medicare also needs to lay some ethical groundwork if it's to expand this much-needed benefit. The medical system has traditionally defaulted to heroic measures to treat people in their final months, even though those treatments will do little to prolong or preserve some modest quality of life. And since several diseases don't follow a strict timeline—especially cancer and other chronic maladies—the decision timeline on when to offer hospice or palliative care (or both) is muddled. A bioethicist should be brought in to discuss the alternatives over a period of time instead of offering only the one-shot consultation. 

Families also need more education as to how the options will work over time and how to alter their decisions as the patients' conditions change. Living wills, legal documents that tell health care providers what to do in the event of severe incapacity, also need to be brought into the counseling paradigm. 

One indirect change in Medicare may force the end-of-life debate to the surface more rapidly than the usual, sluggish public policymaking discourse, and that is that Medicare is now penalizing hospitals for high readmission rates. Will that have any effect on the terminally ill and how they are treated? It's too soon to tell, but it's worth examining as the ACA phases in more cost-saving provisions like these.  

The larger debate, though, should involve an examination of how Americans, as a society, want to regard end-of-life issues. Should we continue to prolong life, no matter the cost and suffering? Or should we take a new humanistic approach that focuses on comfort and pain relief? At what point do heroic measures and experimental treatments unduly compromise a patient's dignity and freedom of choice?

No matter which route we take, a broad public discussion is needed. This may be one of the last taboos in Medicare reform, but one that needs to be addressed if society is to move forward in understanding the dilemma.

First published by The Medicare NewsGroup. Reposted with permission.

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Photo by Judy Baxter, via Flickr.