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Managing Medicare's Costs

End-of-life care and retirement healthcare costs

Thirty percent of Medicare spending is for the five percent of beneficiaries who are in their last year of life. That’s up from 27.9 percent in 1999 and 26.5 percent in 1994. Medicare often spends more on a person during the last year of life than it does in all the prior years of that person’s retirement.

One reason for this spike at the end of life is that Medicare’s fee-for-service approach unravels under stress. Patients require care from multiple specialists, hospitals, and skilled nursing facilities. When their health is failing, they lose the ability to make careful decisions and to say no to doctors’ recommendations.

Because there is often little coordination, doctors unwittingly order duplicate tests and overlapping treatments. With few restrictions, providers are free to administer as many services as they wish while patients needlessly suffer from repeated interventions, most of them expensive. A sizable number of Medicare beneficiaries die while on respirators in intensive care.

People say this is not what they want their final days to be like. A Pew Research Center poll in 2006 found that only 22% of those surveyed believed that doctors should always try to keep patients alive and 70% said that patients should sometimes be allowed to die. The editors of the Dartmouth Atlas of Healthcare have written, “What do patients want at the end of life? Do they want their physicians to do everything possible to extend life? Do they want more time in the hospital? If additional treatments offer little possibility of benefit, do they want more invasive care? Research suggests that the care they get is not necessarily the care they want.”

Columnist Joe Klein described his parents’ final days in Time magazine’s June 11 cover story, and he summarized it in this video. Klein was on a farm in Iowa when his mother’s doctor called to say that she would require a feeding tube to stay alive. Years before, Klein’s mother gave precise instructions that she did not want her life prolonged when it was time to die. Klein’s initial impulse, which he later said turned out to be the right one, was not to put his 91-year-old mother on a feeding tube. But in part because of the evasive answers he received from the internist, who may have had a financial stake in giving further treatments, he agreed to the feeding tube, then caught a plane to State College, Pennsylvania, to be with her.

Every financial planner knows that the key elements in end-of-life planning are the advance directives. These legal instructions come in various shapes – living wills, health care proxies, healthcare powers of attorney and do-not resuscitate orders. States have different rules and terms for these documents, but they all do basically the same thing, which is to empower trusted friends and relatives to say no to medical treatments that meaninglessly extend life a few days or weeks. Yet even the most carefully prepared directives are sometimes ignored by relatives wanting to exhaust all options to keep their loved ones alive.

Experts say it helps when people reinforce their decisions in discussions with family members. And physicians should have candid talks with their older patients about planning for end-of-life care. A March 9 Archives of Internal Medicine study of 603 dying cancer patients at several oncology centers, hospitals and hospices found that care for the patients who had end-of-life discussions with their physicians cost $1,295, compared to $2,780 for patients who did not. The so-called death panels in early drafts of the Health Reform law were wildly mischaracterized, since they were little more than efforts to compensate doctors for this counseling. Most people say they want such counseling.

It helps for the patient to be in the hands of providers who coordinate their care with other doctors, which reigns in some of the excesses of Medicare’s fee-for-service design. After Joe Klein’s mother was discharged from the hospital, he selected a nursing home for her and his father. By “a stroke of wonderful luck,” the nursing home that he chose was staffed by doctors from the Geisinger Health Services system, one of the models for accountable care. From that time forward, Klein writes, he received candid, evidence-based recommendations from Geisinger physicians, who were salaried and had no financial interest in ordering extra treatments and artificially extending life.

There’s ample evidence that coordinated care reduces end-of-life costs and suffering. When elderly patients are released from hospitals and there is no follow-up by the hospital or the primary care physician, they are more likely to be readmitted within the next few weeks. A 2009 study in the New England Journal of Medicine found that almost 20% of patients were rehospitalized in the 30 days following their discharge, and that 34% were readmitted within 90 days.

Prior to Health Reform those readmissions were profitable for hospitals, which could charge Medicare for additional patient days, tests, and treatments. Now, however, hospitals are penalized for preventable readmissions within 90 days of discharge. Hospitals have responded by hiring primary care physicians and nurses to follow-up with discharged patients, answering questions for them and making sure they are taking their medications.

Hospice care is a $14 billion industry that is becoming more prominent in late-life healthcare. Hospice or palliative care is to manage pain and provide some comfort, not to extend life through further medical treatments. People can live at home and if they are approved for Medicare’s hospice benefit, can have around-the-clock access to hospice physicians, nurses, and social counselors. They can also be admitted to hospice facilities for brief periods. While Medicare doesn’t cover certain hospice costs such as room and board, it does pay for medications to keep the patient relatively pain free.

Among many well-known advocates of replacing end-of-life curative treatments with pain control is the Robert Wood Johnson Foundation Center to Advance Palliative Care. One of the Center’s goals is to keep patients from receiving “aggressive care that involves ineffectual and intrusive interventions.” Since 1999, the Center has funded more than $30 million in its attempt to expand hospice care to more hospitals and health care systems.

Hospice care is also a cost-effective solution for certain individuals because a day in the hospital is ten times as expensive as a day in hospice care. Even though Medicare pays most of these costs, a few of them inevitably trickle down to the patient, who pays for the services that are not covered.

A complicating factor is that some hospices may be more interested in profits that in providing effective care. The Medicare Payment Advisory Commission has for several years expressed concern about the rapid growth of for-profit hospice businesses as well as the business practices that some of them use. Last year Peter Waldman wrote a well-researched article in Bloomberg News on the questionable tactics of a few hospice operators that admit patients who are not in their final months. By keeping these patients for longer-than-usual periods, the hospices receive additional Medicare daily reimbursements. Moreover, Waldman found that some hospices gave kickbacks or other financial incentives to doctors who provided referrals. Neither the extended stays nor the kickbacks directly affects patients’ wellness, but an organization that cuts ethical corners is more likely at some point to cut needed care for its patients.

Still, hospice and palliative care are prudent approaches to the challenges of managing end-of-life care. Susan Jacoby recently wrote in the New York Times of her mother’s decision in the last year of life to live relatively pain-free at home and not undergo further tests. Two weeks before she died, her mother went to a hospice, and her final days were apparently peaceful. Jacoby said that “end-of-life planning is one of the few actions within the power of individuals who wish to help themselves and their society. Too few Americans are shouldering this responsibility.” ◊◊

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