СВО PAPER High-Cost Medicare Beneficiaries May 2005 The Congress of the United States■ Congressional Budget Office Notes All years referred to in this paper are calendar years. Numbers in the text and tables may not add up to totals because of rounding. All dollar amounts are expressed in 2005 dollars (having been converted using the GDP price deflator). T otal Medicare spending exceeded $300 billion in 2004 and is expected to grow significantly in the coming decades. In response to those financial pressures, policymakers have considered a number of strategies for slowing the growth of Medicare spending, including increasing the share of spending paid by beneficiaries and enhancing competition in the provision of services. This Congressional Budget Office (CBO) paper, prepared at the request of the Senate Majority Leader, explores an additional approach: focusing on the small group of beneficiaries that accounts for a large share of the program's spending. Possible intervention strategies would aim to reduce that spending. The paper analyzes the concentration of Medicare spending in a given year and over time using data from Medicare claims and considers illustrative methods for identifying beneficiaries who are likely to incur high future costs. In keeping with CBO's mandate to provide objective, nonpartisan analysis, this paper makes no recommendations. Julie Lee and Todd Anderson of CBO's Health and Human Resources Division prepared the paper under the supervision of Bruce Vavrichek, James Baumgardner, Steve Lieberman, and Mark Miller. (Todd Anderson, Steve Lieberman, and Mark Miller have since left CBO). Susan Labovich provided computer programming support and coordinated CBO's access to the data used in this analysis. Tom Bradley, Philip Ellis, and Allison Percy, also of CBO, provided thoughtful comments on drafts, as did Amber Barnato of the University of Pittsburgh and Jeffrey Kelman of the Centers for Medicare and Medicaid Services. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.) Dr. Barnato and Jennifer Bowman, formerly of CBO, helped to draft portions of an earlier version of the paper. Christine Bogusz edited the paper, and Loretta Lettner proofread it. Maureen Costantino prepared the paper for publication and designed the cover. Lenny Skutnik printed copies of the paper, and Annette Kalicki produced the electronic version for CBO's Web site (www.cbo.gov). Dongen Hz.-E. Douglas Holtz-Eakin Director May 2005 CONTENTS Summary and Introduction / The Concentration of Medicare Expenditures 2 The Persistence of Medicare Expenditures 5 The Concentration of Spending Over a Five-Year Prospectively Identifying Future High-Cost Beneficiaries 8 Illustrative Strategies for Identifying High-Cost Beneficiaries 9 Approaches to Managing Care for High-Cost |