Global Medical Cures™ | Medicare Payments- How Much Do Chronic Conditions Matter?

MMRR

2013: Volume 3 (2)

Medicare & Medicaid Research Review
2013: Volume 3, Number 2

A publication of the Centers for Medicare & Medicaid Services,
Office of Information Products and Data Analytics

Medicare Payments: How Much Do Chronic Conditions
Matter?
Erkan Erdem,1 Sergio I. Prada,2,3 Samuel C. Haffer4

IMPAQ International LLC
PROESA-Research Center for Social Protection and Health Economics
3
Universidad Icesi
4
Centers for Medicare & Medicaid Services
1

2

Objective: Analyze differences in Medicare Fee-for-Service utilization (i.e., program payments) by
beneficiary characteristics, such as gender, age, and prevalence of chronic conditions.
Methods: Using the 2008 and 2010 Chronic Conditions Public Use Files, we conduct a descriptive
analysis of enrollment and program payments by gender, age categories, and eleven chronic conditions.
Results: We find that the effect of chronic conditions on Medicare payments is dramatic. Average
Medicare payments increase significantly with the number of chronic conditions. Finally, we quantify the
effect of individual conditions and find that “Stroke / Transient Ischemic Attack” and “Chronic Kidney
Disease” are the costliest chronic conditions for Part A, and “Cancer” and “Chronic Kidney Disease” are
the costliest for Part B.
Keywords: Medicare, Chronic Disease, Gender/Sex Differences in Health and Health Care, Health Care Costs,
Health Promotion / Prevention / Screening, Chronic Conditions, Dual-Eligibility, Public Use Files, Medicare Part
A, Medicare Part B
doi: http://dx.doi.org/10.5600/mmrr.003.02.b02

Erdem, E., Prada, S. I., Haffer, S. C.

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Introduction
There has been a growing interest in understanding the utilization patterns of patients with
chronic conditions (DHHS, 2010). Even though there is a lack of standard definition and
identification of a chronic condition (Gorina & Kramarow, 2011), these conditions, such as
heart disease, cancer, obesity, and diabetes, are long-lasting and persistent health problems that
require continuous care. Recent research has emphasized the disproportionate share of
beneficiaries with chronic conditions in healthcare expenditures (Anderson, 2010). For example,
patients with multiple chronic conditions can cost up to seven times as much as patients with
only one chronic condition (AHRQ, 2006). According to Centers for Disease Control and
Prevention (CDC), chronic diseases are responsible for more than 75 percent of the $2.5 trillion
spent annually on health care (CDC, 2009). Examples of efforts to estimate the spending or costs
by individual conditions are shown in Exhibit 1.
Exhibit 1. Summary of Studies on Chronic Conditions
Chronic Condition
Estimate
Year of
Estimate
Cardiovascular diseases
$442 billion
2011
Diabetes
$245 billion
2012
Lung disease
$174 billion
2010
Obesity
$147 billion
2008
Arthritis/rheumatic cond. $128 billion
2003
Alzheimer’s
$183 billion
2011
All/General
$2.5 trillion
2005

Organization/Author
American Heart Association/ Heidenreich et al., 2011
American Diabetes Association, 2011
National Heart, Lung, and Blood Institute (NHLBI), 2009
Finkelstein, Trogdon, Cohen, & Dietz, 2009
Yelin et al., 2007
Alzheimer’s Association, 2011
Centers for Disease Control and Prevention (CDC)

SOURCE: Authors’ analysis.

Chronic conditions affect the elderly disproportionally. Lehnert et al. (2011) summarizes the
empirical evidence on health care utilization and costs of elderly persons with multiple chronic
conditions in the last two decades. The evidence suggests that elders with more chronic
conditions had significantly more physician visits, hospital admissions or days/nights spent at a
hospital, and more use and/or cost of prescription medications. Studies cited in Lehnert et al.
(2011) also suggest that healthcare costs and out-of-pocket payments increase significantly with
chronic conditions and that each additional chronic condition almost double healthcare costs.
Medicare is the biggest health insurance program covering the elderly (65 years of age
and older) in the U.S.; the prevalence of chronic conditions has been identified as a critical
driver of total Medicare spending (Schneider, O’Donnell, & Dean, 2009). Thorpe, Ogden, and
Galactionova (2010) argue that much of the recent growth in Medicare spending (1987–2006) is
attributable to chronic conditions, such as diabetes, arthritis, hypertension, and kidney disease,
and that this represents a shift of spending from inpatient to outpatient services combined with
prescription drug use.


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This data brief summarizes differences in Medicare Part A and B payments by chronic
conditions and estimates the effect of chronic conditions on average Medicare payments by age
and gender on both programs. Our analyses take advantage of the newly released 2008 and 2010
Chronic Conditions Public Use Files (PUFs; CMS, 2013). These PUFs are based on claims
collected for all Fee-for-Service (FFS) Medicare beneficiaries, thus overcoming some of the
limitations in figures available elsewhere, in particular the accuracy due to sampling error,
survey design, and/or recollection of past events by interviewees. An equally important goal of
this data brief is to describe advantages and limitations of these datasets for analysts who would
like to use them for future work.
Advantages of CMS Chronic Conditions PUFs
In this section we describe our data source and highlight its main advantages and disadvantages
by comparing it with other sources. The first and most evident advantage is that these PUFs
offer a multidimensional view (by all combinations of age categories, gender, Medicaid
eligibility, and eleven chronic conditions) of several payment and utilization variables for
Medicare beneficiaries by program, previously unavailable to analysts. It is well known that
access to Medicare claims data besides these PUFs is restricted to the public due to privacy and
confidentiality concerns.
Second, the CMS Chronic Conditions PUF represents 100% of the Medicare
beneficiaries provided in the 100% Beneficiary Summary File for each reference year. The 100%
Beneficiary Summary File is created annually and contains demographic, entitlement, and
enrollment data for beneficiaries who were documented as being alive for some part of the
reference year of the Beneficiary Summary File, are entitled to Medicare benefits during the
reference year, and enrolled in Medicare Part A and/or Part B for at least one month in the
reference year.
Third, the CMS Chronic Conditions PUF provides various measures of utilization as
averages for different groups of Medicare beneficiaries, or profiles separated by program and
enrollment type. Beneficiaries with 12 months of enrollment in FFS Part A or Part B are
separated from beneficiaries with less than 12 months of enrollment. Such figures were not
available to the public in a PUF before.
Fourth, chronic conditions included in these PUFs are taken directly from CMS Chronic
Condition Data Warehouse Condition Categories, which in turn, are identified using peer
reviewed clinical algorithms that look for valid ICD-9/CPT4/HCPCS codes in claims files for
chronic-disease-specific reference time periods.
Other PUFs, for instance, the National Health Interview Survey (NHIS) includes over 30
chronic condition indicators, but respondents are asked about their conditions (and information
is later processed at NCHS) only if certain limitations (e.g., difficulties walking, eating, bathing,
etcetera) are present (CDC, 2011). Similarly, while the CDC’s Behavioral Risk Factor
Surveillance System (BRFSS) includes questions related to chronic conditions (e.g., “Ever told

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you had a stroke?”), these are for a limited number of conditions (e.g., asthma, diabetes,
arthritis, cardiovascular disease, diabetes) and are subject to accuracy bias due to self-reporting.
Fifth, the CMS Chronic Conditions PUFs include payments and utilization for each
profile. Neither NHIS nor BRFSS include such information. While the Medical Expenditure
Panel Survey (MEPS) collects information on expenditures by source of payment (i.e. Private,
Medicaid, and Medicare) on a handful of medical conditions, these conditions are self-reported
and rely on accurate recollection by respondents (AHRQ, 2011). Another drawback in MEPS is
that priority conditions are included in the file only if the condition is current. Even though
MEPS collects information directly from providers, such information is not used to supplement
or verify reported conditions by respondents.
Although these CMS PUFs contain valuable information on FFS Medicare beneficiaries,
they have a few shortcomings. For example, they do not allow for analyzing different types of
Medicare enrollees, such as the people with disabilities or End Stage Renal Disease who are also
eligible for free Medicare hospital (Part A) insurance (SSA, 2012). Second, the dual-eligibility
indicator groups all Medicare beneficiaries who are eligible for any form of Medicaid benefit in
any month in 2008/2010, and does not allow for investigation of different types of dual-eligibles
(CMS, 2012). Third, the data only contains Medicare payments and does not allow for analysis
of other healthcare expenses or payments (e.g., Medicaid costs for dual-eligibles, out-of-pocket
expenses). Finally, the data is restricted to a total of eleven chronic conditions. Hence, analyses
based on these data might be underestimating the condition of the beneficiaries who may have
other conditions that are not included in the data source.
The effect of chronic conditions on Medicare payments
We start by looking at changes between 2008 and 2010 for beneficiaries enrolled in Part A and B
(Exhibit 2 and Exhibit 3) for the entire year who were not eligible for Medicaid. 1 We restrict our
analyses to this subpopulation of a relatively homogeneous group of beneficiaries for two
reasons: (1) by excluding those who were not enrolled for the full year, we control for changes
due to deaths and for those just aging into the program; and (2) by excluding those eligible for
Medicaid we focus on determinants of cost only for Medicare beneficiaries whose characteristics
(e.g., health, socioeconomic status) might differ from dual eligible beneficiaries. Exhibit 2
summarizes enrollment and Medicare spending for Medicare Part A by number of chronic
conditions in 2008 and 2010.
The findings in Exhibit 2 can be summarized in the following bullet points:
•

Beneficiaries with chronic conditions account for a disproportionate share of
program payments for Part A. While 36% of Part A beneficiaries have two or

Note that these are not two disjoint populations. Most traditional Medicare (Part A) beneficiaries also have Part B
coverage (about 90 percent). Medicare beneficiaries who also qualify for Medicaid benefits are known as dualeligibles.

1


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more chronic conditions, these beneficiaries account for 86% of total Part A
payments in both years.
• Total Medicare payments for Part A benefits increased by 5.2% between 2008
and 2010. 98% of the increase (about $4.1 billion) was for the care of those
with 2 or more chronic conditions.
• The average Part A payment per beneficiary was higher by a factor of 5.3 in
2008 and 5.4 in 2010 for beneficiaries with exactly one chronic condition
compared to beneficiaries without any chronic conditions.
• Overall, the increase in total payments (5.2%) is explained mainly by the
increase in average payment (4.3%), which increases from $2,945 per enrollee
in 2008 to $3,070 in 2010. The rest of the increase in total Medicare Part A
payments is due to the increase in enrollment (0.9%).
Exhibit 3 summarizes enrollment and Medicare spending for Medicare Part B by the number of
chronic conditions in 2008 and 2010.
The findings in Exhibit 3 can be summarized in the following bullet points:
•

Beneficiaries with chronic conditions account for a disproportionate share of
program payments for Part B. However, their share in Part B is lower than
their share in Part A. About 41% of Part B beneficiaries have two or more
chronic conditions and these beneficiaries account for approximately 70% of
total Part B payments in both years.
• Total Medicare payments for Part B benefits increased by 10.7% between 2008
and 2010. 76% of the increase ($9.2 billion) was for the care of those with 2 or
more chronic conditions.
• The average Part B payment per beneficiary was higher by a factor of
approximately 2.35 in both years for beneficiaries with exactly one chronic
condition compared to beneficiaries without any chronic conditions.
• Overall, the increase in total payments (10.7%) is explained mainly by the
increase in average payment (10.3%), which increases from $3,640 per
enrollee in 2008 to $4,015 in 2010. The rest of the increase in total Medicare
Part B payments is due to the increase in enrollment (0.4%). Interestingly, the
increase in average Part B payments between 2008 and 2010 is consistently
high—in the 8.3% to 9.8% range—even for those without any chronic
conditions.
Next, we quantify the effect of each chronic condition individually on average Medicare
payments. 2 Exhibits 4 (Part A) and 5 (Part B) show these effects by gender and age categories for
the same population depicted in Exhibit 2 and Exhibit 3. The values in the tables provide the
The PUFs are also useful to analyze the effect of multiple chronic conditions, which we do not consider in this
study.

2


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ratio of average payment with exactly one chronic condition and average payment without any
chronic conditions. For example, having “Alzheimer’s/Senile Dementia” increases the average
Medicare payment for Part A by a factor of 7.3 for male enrollees who are in the under 65 age
category in 2008.
The findings in Exhibit 4 and Exhibit 5 can be summarized in the following bullet points:
•

•

•

•

•

Exhibit 4 shows that “Stroke / Transient Ischemic Attack” is the costliest
chronic condition for Part A payments for every combination of gender and
age category both in 2008 and 2010, except for a few gender and age category
combinations where “Chronic Kidney Disease” has a larger factor. For
example, male enrollees in the 65–69 age category with “Stroke/Transient
Ischemic Attack” had average Part A payments 21.5 times higher in 2008 and
24 times higher in 2010 than enrollees without this chronic condition.
Average Part A payments for enrollees with “Stroke/Transient Ischemic
Attack” were about 12 times higher than enrollees without this chronic
condition in 2008 and 12.8 times for 2010.
The chronic condition with the lowest factor for Part A payments, on average,
is “Diabetes” with a range of 1.6–3.3 in 2008 and 1.6–3.2 in 2010 (depending
on the gender and age category combination). Also, “Cancer” and
“Osteoporosis” were two other chronic conditions with relatively smaller
effects on average Medicare Part A payments in both years.
The factors were higher for males compared to females in the same age
category for most chronic conditions (except for a few age categories with
“Alzheimer’s Disease” and “Cancer” and one age category with “Congestive
Heart Failure”) in 2008. The findings were similar in 2010.
The effect of each chronic condition in both years is considerably lower for
average Part B payments (Exhibit 5) compared to Part A payments. “Cancer”
is the costliest condition in both years, with factors of 4.9 for males and 5.5 for
females in 2008, and 4.7 and 5.3 in 2010, respectively. Similar to the finding in
the analysis of Part A payments, “Chronic Kidney Disease” ranks second in
both years. The factors for this condition for beneficiaries under 65 years of
age were significantly higher than other age categories: 13.7 and 9.8 in 2008
for males and females, respectively, and 12.0 and 8.3 in 2010.
Note that average Part B payments for enrollees with “Cancer” are
approximately 3–9 times higher than enrollees without any chronic
conditions in both years. Also, “Alzheimer’s,” “Diabetes,” and “Osteoporosis”
turn out to be the chronic conditions with the smallest effect on average
Medicare Part A payments in both years.


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Exhibit 2. Changes in Enrollment, Total Payments and Average Payment per Enrollee for Medicare Part A full year beneficiaries by number of chronic
conditions
Number of
Chronic
Conditions

Number of Enrollees Part A

Total Payment Part A (Millions)

2008
0
1
2
3
4
5
6
7
8
9
10
Total

2010

Difference

% Change

2008

2010

Difference

10,138,926
6,663,517
4,583,587
2,632,736
1,399,364
649,251
251,404
80,674
19,532
2,991
225
26,422,207

10,245,731
6,609,818
4,605,347
2,680,459
1,445,912
686,250
276,226
91,023
23,089
3,910
269
26,668,034

106,805
(53,699)
21,760
47,723
46,548
36,999
24,822
10,349
3,557
919
44
245,827

1.1%
-0.8%
0.5%
1.8%
3.3%
5.7%
9.9%
12.8%
18.2%
30.7%
19.6%
0.9%

$2,511
$8,754
$13,740
$15,714
$15,097
$11,391
$6,575
$2,924
$913
$168
$15
$77,803

2,512
8,833
13,936
16,203
15,890
12,292
7,418
3,442
1,114
226
18
$81,884

1
79
196
489
792
901
843
518
200
58
3
$4,081

% Change
0.0%
0.9%
1.4%
3.1%
5.2%
7.9%
12.8%
17.7%
21.9%
34.9%
19.8%
5.2%

Average Payment per
beneficiary
2008

2010

$248
$1,314
$2,998
$5,969
$10,789
$17,545
$26,153
$36,243
$46,766
$56,014
$68,333
$2,945

$245
$1,336
$3,026
$6,045
$10,989
$17,912
$26,854
$37,813
$48,243
$57,806
$68,495
$3,070

% Change
-1.0%
1.7%
0.9%
1.3%
1.9%
2.1%
2.7%
4.3%
3.2%
3.2%
0.2%
4.3%

NOTE. Excludes 384 profiles that do not have information on all chronic conditions.
SOURCE: Chronic Conditions Public Use Files, 2008 and 2010


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Exhibit 3. Changes in Enrollment, Total Payments and Average Payment per Enrollee for Medicare Part B full year beneficiaries by number of chronic
conditions
Number of
Chronic
Conditions

Number of Enrollees Part B
2008

0
1
2
3
4
5
6
7
8
9
10
Total

7,497,739
6,498,765
4,514,823
2,606,318
1,389,361
646,544
250,820
80,613
19,543
2,996
225
23,507,747

2010
7,468,750
6,434,014
4,529,488
2,651,090
1,434,539
682,883
275,493
90,968
23,093
3,944
269
23,594,531

Difference
(28,989)
(64,751)
14,665
44,772
45,178
36,339
24,673
10,355
3,550
948
44
86,784

Total Payment Part B (Millions)
% Change
-0.4%
-1.0%
0.3%
1.7%
3.3%
5.6%
9.8%
12.8%
18.2%
31.6%
19.6%
0.4%

2008

2010

Difference

$8,665
$17,690
$19,222
$15,972
$11,770
$7,095
$3,410
$1,313
$366
$62
$5
$85,571

9,455
19,108
20,975
17,643
13,181
8,131
4,058
1,617
475
88
7
$94,739

790
1,419
1,753
1,671
1,411
1,035
648
304
109
27
2
$9,168

% Change
9.1%
8.0%
9.1%
10.5%
12.0%
14.6%
19.0%
23.2%
29.7%
42.9%
37.5%
10.7%

Average Payment per
beneficiary
2008

2010

$1,156
$2,722
$4,258
$6,128
$8,472
$10,974
$13,597
$16,283
$18,729
$20,638
$22,367
$3,640

$1,266
$2,970
$4,631
$6,655
$9,189
$11,906
$14,730
$17,771
$20,557
$22,404
$25,717
$4,015

% Change
9.5%
9.1%
8.8%
8.6%
8.5%
8.5%
8.3%
9.1%
9.8%
8.6%
15.0%
10.3%

NOTE. Excludes 384 profiles that do not have information on all chronic conditions.


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Exhibit 4. Effect of Chronic Conditions on Average Medicare Part A Payment per Enrollee for FY Enrollee Non Dual Eligibles
ALZ CANCER CHF CHRKID COPD DEPR DIAB ISCHE OSTEO
2008 All Male
9.1
5.2
7.5
11.7
8.7
7.8
2.4
5.9
4.7
Male
Under 65
7.3
8.6
6.9
14.4
10.2
7.6
3.3
5.4
6.9
65–69
9.7
9.1
9.9
16.2
10.9
7.8
2.8
8.4
5.1
70–74
7.5
5.4
7.2
10.8
8.6
6.8
2.2
6.4
3.9
75–79
6.7
3.9
6.0
9.0
7.3
6.1
2.1
5.3
3.5
80–84
6.7
3.2
5.2
6.9
6.4
5.2
1.8
4.2
3.4
85 & Older 7.4
3.4
5.9
7.1
6.6
6.2
2.1
3.6
4.7
All Female
Female

2010

All Male
Male

All Female
Female

RA/OA
7.9
5.0
11.4
8.9
7.5
5.9
4.9

STRK
15.2
13.1
21.5
15.8
12.8
11.1
11.1

10.1
8.3
8.8
6.6
7.1
6.8
7.7

5.8
6.5
7.3
6.0
5.3
4.7
5.0

7.3
7.7
9.5
7.1
5.7
5.2
5.2

9.1
14.0
12.9
8.9
7.0
5.8
5.6

6.7
7.9
8.4
6.6
5.9
5.6
5.6

5.2
6.0
5.7
4.7
4.3
4.1
4.3

2.0
3.0
2.5
2.0
1.8
1.6
1.7

4.8
4.8
6.3
5.1
4.5
3.8
3.2

2.5
3.7
2.3
2.1
2.1
2.3
2.9

6.4
4.4
9.1
7.3
6.4
5.1
3.8

12.8
10.0
18.0
13.1
11.4
10.0
9.3

10.0
Under 65
9.0
65–69
11.6
70–74
8.7
75–79
7.3
80–84
6.9
85 & Older 8.0

5.1
7.7
8.5
5.4
3.7
3.2
3.2

8.0
7.2
11.3
7.6
6.5
5.9
5.7

12.1
14.7
17.2
11.7
8.5
7.2
7.5

9.0
10.3
11.6
8.8
7.4
6.2
6.8

8.0
7.6
8.7
6.6
6.6
5.6
5.7

2.4
3.2
2.8
2.2
1.9
1.9
2.1

5.4
5.0
7.8
5.8
4.9
3.8
3.4

4.6
6.7
5.3
4.0
3.4
3.3
4.3

8.7
5.1
12.8
9.9
8.4
6.4
4.8

16.5
12.2
24.0
18.0
13.9
12.0
11.7

11.4
8.6
9.7
7.6
7.5
7.3
8.5

5.5
6.7
7.1
5.5
5.0
4.4
4.6

7.9
7.3
10.1
7.1
6.4
5.4
5.6

8.8
14.2
13.2
8.3
6.8
5.4
5.1

6.7
8.2
8.2
6.8
5.7
5.5
5.3

5.3
6.2
5.8
4.9
4.4
4.0
4.1

2.0
2.8
2.6
1.9
1.8
1.6
1.6

4.6
5.0
5.9
4.6
4.2
3.5
3.1

2.5
3.4
2.5
2.1
2.2
2.3
2.8

7.1
4.7
10.4
8.1
7.1
5.5
3.8

13.4
10.4
18.2
13.9
11.7
10.3
9.4

Under 65
65–69
70–74
75–79
80–84
85 & Older

Under 65
65–69
70–74
75–79
80–84
85 & Older

NOTE. Excludes 384 profiles that do not have information on all chronic conditions. ALZ: Alzheimer's Disease and Related Disorders or Senile Dementia; CANCER: Cancer; CHF: Chronic
Heart Failure; CHRKID: Chronic Kidney Disease; COPD: Chronic Obstructive Pulmonary Disease; DEPR: Depression; DIAB: Diabetes; ISCHE: Ischemic Heart Disease; OSTEO:
Osteoporosis; RA/OA: Rheumatoid Arthritis/Osteoarthritis Arthritis; STRK: Stroke / Transient Ischemic Attack


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Exhibit 5. Effect of Chronic Conditions on Average Medicare Part B Payment per Enrollee for FY Enrollees
ALZ CANCER CHF CHRKID COPD DEPR DIAB ISCHE
2008
All Male
2.1
4.9
2.6
4.9
2.9
2.5
1.8
2.5
Male
Under 65
2.6
8.9
3.2
13.7
3.7
3.0
2.6
2.7
65–69
2.3
6.1
2.8
4.5
3.1
2.8
1.9
2.6
70–74
1.9
4.8
2.4
3.5
2.7
2.5
1.7
2.3
75–79
1.8
4.1
2.3
3.1
2.6
2.4
1.6
2.2
80–84
1.6
3.4
2.1
3.0
2.5
2.2
1.6
2.1
85 & Older 1.7
3.1
2.1
2.8
2.6
2.4
1.7
2.1
All Female
Female

2010

All Male
Male

All Female
Female

OSTEO
2.7
5.0
2.8
2.4
2.2
2.2
2.3

RA/OA
2.7
3.4
3.0
2.5
2.3
2.2
2.2

STRK
3.1
3.4
3.5
2.9
2.6
2.6
2.6

Under 65
65–69
70–74
75–79
80–84
85 & Older

1.5
2.3
1.8
1.5
1.4
1.3
1.5

5.5
9.4
6.7
5.6
4.7
4.1
3.7

2.2
3.3
2.5
2.3
2.1
1.9
2.0

3.7
9.8
3.9
3.1
2.7
2.5
2.5

2.5
2.8
2.6
2.4
2.3
2.3
2.6

2.1
2.4
2.2
2.0
1.9
1.9
2.2

1.6
2.0
1.7
1.6
1.5
1.5
1.6

2.2
2.4
2.3
2.1
2.0
1.9
2.0

1.7
2.7
1.7
1.6
1.5
1.6
1.8

2.3
2.8
2.6
2.3
2.1
1.9
2.1

2.6
2.9
3.0
2.6
2.4
2.4
2.5

Under 65
65–69
70–74
75–79
80–84
85 & Older

2.1
2.5
2.4
1.9
1.7
1.6
1.7

4.7
8.1
6.0
4.4
3.8
3.2
2.9

2.7
3.4
3.0
2.5
2.4
2.2
2.1

4.4
12.0
4.4
3.3
2.9
2.8
2.7

2.8
3.5
3.0
2.6
2.4
2.3
2.4

2.5
3.1
2.9
2.4
2.3
2.3
2.4

1.8
2.6
2.0
1.6
1.6
1.6
1.7

2.5
2.7
2.7
2.3
2.2
2.1
2.1

2.8
4.8
3.1
2.3
2.2
2.2
2.2

2.8
3.5
3.2
2.5
2.3
2.2
2.2

3.1
3.4
3.7
2.9
2.6
2.5
2.5

Under 65
65–69
70–74
75–79
80–84
85 & Older

1.5
2.3
1.8
1.5
1.3
1.3
1.4

5.3
8.5
6.7
5.2
4.5
3.8
3.5

2.3
3.5
2.7
2.2
2.1
1.9
2.0

3.2
8.3
3.5
2.8
2.5
2.2
2.3

2.4
2.7
2.5
2.3
2.2
2.1
2.4

2.1
2.4
2.2
2.0
1.9
1.8
2.1

1.6
1.9
1.7
1.5
1.5
1.4
1.6

2.1
2.4
2.3
2.1
2.0
1.9
1.9

1.7
2.8
1.7
1.6
1.5
1.6
1.8

2.3
2.8
2.7
2.2
2.1
1.9
2.1

2.7
3.0
3.1
2.7
2.4
2.3
2.4

NOTE. Excludes 384 profiles that do not have information on all chronic conditions. ALZ: Alzheimer's Disease and Related Disorders or Senile Dementia; CANCER: Cancer; CHF: Chronic
Heart Failure; CHRKID: Chronic Kidney Disease; COPD: Chronic Obstructive Pulmonary Disease; DEPR: Depression; DIAB: Diabetes; ISCHE: Ischemic Heart Disease; OSTEO:
Osteoporosis; RA/OA: Rheumatoid Arthritis/Osteoarthritis Arthritis; STRK: Stroke / Transient Ischemic Attack


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Conclusion
The influence of chronic conditions on healthcare costs has been widely discussed in the
literature. In this brief, we provided detailed analysis of changes in Medicare Part A and B
payments, enrollment, and average payment per beneficiary stratifying the data by prevalence of
chronic conditions. In addition, we estimated the effect of each chronic condition on average
Medicare Part A and B payments, individually controlling for age and gender. Our analyses were
restricted to beneficiaries who were enrolled for the entire year and who were not eligible for
Medicaid.
To conclude, we show that people with chronic conditions account for a
disproportionate share of program payments for both Part A and B in both years. Likewise, we
show that average payments increase significantly with the number of chronic conditions. For
example, the existence of one chronic condition increased average Part A payments by a factor
of 5.3 and 5.4 in 2008 and 2010, respectively. We also show that the number of chronic
conditions has a larger effect on average payments for Part A than on Part B for both years.
Furthermore, our results show that the overall increase in both Medicare Part A and Part B
payments is due to rising average payments rather than growth in enrollment.
Lastly, we show that (1) “Stroke / Transient Ischemic Attack” and “Chronic Kidney
Disease” are the costliest chronic conditions for Part A program payments in both years; (2)
“Cancer” and “Chronic Kidney Disease” are the costliest chronic conditions for Part B program
payments in both years; (3) the effect of each chronic condition on average payments is lower for
Part B than for Part A in both years; and (4) the effect of a chronic condition on the average Part
A and Part B payments is generally larger for male beneficiaries compared to female
beneficiaries.
The impact of chronic conditions in the growth of health care costs has been widely
recognized. This study does not offer a solution to the problem, but it quantifies how much each
of the eleven chronic conditions (available in our source data) increase average Medicare
payments. It draws attention to conditions that have the largest effect on costs in Medicare Part
A and Part B (e.g., Stroke / Transient Ischemic Attack, Chronic Kidney Disease, Depression),
which may be targeted by policy makers. These findings can help policymakers prioritize the
efforts to reduce health care costs by focusing on the health conditions that matter the most.


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2013: Volume 3 (2)

Disclaimers

The views expressed in this article are those of the authors and do not necessarily reflect the views of the U.S.
Department of Health and Human Services, the Centers for Medicare & Medicaid Services, or IMPAQ
International.

Correspondence
Erkan Erdem, Ph.D., IMPAQ International LLC, 1101 Vermont Ave NW, Washington, DC
20005, eerdem@impaqint.com, Tel.: (202) 696-1037, Fax: (202) 289-0024

Acknowledgements

We thank Cynthia Woodcock for her comments on preliminary versions of this paper.

Disclosures

The research in this article was supported by the Centers for Medicare & Medicaid Services under Contract Number
500-2006-00007I/#T0004 with IMPAQ International.


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References
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MMRR 2013 Volume 3, Number 2

Medicare & Medicaid Research Review
2013
Volume 3, Number 2

Mission Statement
Medicare & Medicaid Research Review is a peer-reviewed, online journal reporting data and
research that informs current and future directions of the Medicare, Medicaid, and Children’s
Health Insurance programs. The journal seeks to examine and evaluate health care coverage,
quality and access to care for beneficiaries, and payment for health services.
http://www.cms.gov/MMRR/

U.S. Department of Health & Human Services
Kathleen Sebelius
Secretary
Centers for Medicare & Medicaid Services
Marilyn Tavenner
Administrator
Editor-in-Chief
David M. Bott, Ph.D.

The complete list of Editorial Staff and Editorial Board members
may be found on the MMRR Web site (click link):
MMRR Editorial Staff Page

Contact: mmrr-editors@cms.hhs.gov
Published by the Centers for Medicare & Medicaid Services
All material in the Medicare & Medicaid Research Review is in the public domain
and may be duplicated without permission. Citation to source is requested.
ISSN: 2159-0354
doi: http://dx.doi.org/10.5600/mmrr.003.02.b02

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