When asked why he robbed banks, the famous robber Wille Sutton supposedly said: “Because that’s where the money is.” End-of-life medical spending has long attracted attention from healthcare policymakers for the same reason. Medicare spends a quarter of its budget on people in their last year of life. Hence, it seems obvious that efforts to contain healthcare costs need to address last-year spending. But is that actually where the money is? A new study looking at end-of-life spending across nine countries calls the last-year dogma into question.
This study found that only 8 to 11 percent of total healthcare spending occurred in the last year of life. Interestingly, last-year costs in the United States were the smallest percentage of total healthcare outlays (8.5 percent), while still representing the greatest per capita expenditure ($80,000); a consequence of our massive spending on healthcare. The proportion of end-of-life spending was remarkably consistent across the nations studied, in spite of their differing healthcare systems. Much greater variation was seen in how that spending was split across categories, particularly the portion going towards hospital spending. Finally, spending in the final three years of life represented 16.7 to 24.5 percent of total spending, with the United States again representing the lowest figure. The study’s authors suggest that the importance of the final three years of life may reflect spending on chronic conditions rather than heroic end-of-life efforts.
So how do these results square up with Medicare spending a quarter of its budget on the last year of life? Well, Medicare is likely not representative of the overall healthcare system, since it largely covers the elderly and disabled. In terms of policy lessons, this study demonstrates that the United States doesn’t have an end-of-life spending issue, as much as a general healthcare spending issue. If policymakers are looking for a bank to rob, spending in the last year of life may not be the most lucrative target, especially given the political salience of anything resembling “death panels”. A more tempting target may be super-utilizers, a small group with complex chronic conditions who use a disproportionate share of healthcare resources.
commentary by Matthew Stampfl
Although end-of-life medical spending is often viewed as a major component of aggregate medical expenditure, accurate measures of this type of medical spending are scarce. We used detailed health care data for the period 2009–11 from Denmark, England, France, Germany, Japan, the Netherlands, Taiwan, the United States, and the Canadian province of Quebec to measure the composition and magnitude of medical spending in the three years before death. In all nine countries, medical spending at the end of life was high relative to spending at other ages. Spending during the last twelve months of life made up a modest share of aggregate spending, ranging from 8.5 percent in the United States to 11.2 percent in Taiwan, but spending in the last three calendar years of life reached 24.5 percent in Taiwan. This suggests that high aggregate medical spending is due not to last-ditch efforts to save lives but to spending on people with chronic conditions, which are associated with shorter life expectancies.