Reform Could Mean Lower Medicare Costs

Enacting national healthcare reform legislation to extend coverage to the uninsured could prove to be a boon to one federal program: Medicare. By providing care to uninsured adults prior to age 65, more individuals could see improved healthcare—resulting in reduced Medicare spending in the long term, according to researchers of a new study published in the Annals of Internal Medicine.

Earlier studies have shown that Medicare spending may be higher for previously uninsured adults with cardiovascular disease and diabetes if poor or delayed care leads to complications before the age of 65 years. In addition, uninsured adults also may delay various costly elective procedures such as joint replacements for severe arthritis until they become eligible for Medicare, according to the researchers from Harvard Medical School.

The researchers used data from the nationally representative Health and Retirement Study, which beginning in 1992 interviewed older adults every two years about sources of health insurance. Looking at claims data from 1996 to 2005, they reviewed spending and hospitalization rates for adults with cardiovascular disease, diabetes, and arthritis, and also assessed annual total Medicare spending after age 65.

When the 2,951 continuously insured adults were compared with 1,616 adults who were continuously or intermittently uninsured before age 65, a noticeable difference was noted in annual costs.

Mean adjusted annual Medicare spending over the study period—from 1996 to 2005—appeared to be "significantly higher" for previously uninsured adults than for previously insured adults: $5,796 for those previously uninsured versus $4,773 for the previously insured, they said. Multiplied over years for millions of Medicare beneficiaries, these savings could be significant.

Much of the difference in the annual rates were related largely to increased inpatient and home health agency spending—concentrated among the 67% of adults who had cardiovascular diseases or diabetes. Those adults who were previously uninsured had more hospital stays and outpatient institutional visits than previously insured adults—but not more physician office visits.

Among those adults with cardiovascular diseases or diabetes, previously uninsured adults were more likely to be hospitalized for complications such as myocardial infarction, heart failure, or even stroke. And for those with arthritis, those who were uninsured before enrolling in Medicare were more likely to be hospitalized for joint replacement than those with prior coverage.

Thus, extending insurance to uninsured adults may result in improved health for many older working age adults—and even increased life expectancy. Plus, subsequent reductions in Medicare spending after age 65 could partially offset increased spending from expanded coverage before age 65.

The researchers, putting their findings into dollars, calculated that providing coverage to adults ages 51 to 64 would increase healthcare spending by $197 billion annually. However, this increased coverage would decrease later Medicare spending (for adults ages 65 to 74) by about $98 billion—essentially offsetting nearly half of the original costs.

These benefits suggest that health insurance coverage for uninsured adults—especially over the age 50—would be a more "valuable investment for the United States than previously thought," the researchers said.