Medicare HMO Impact on Utilization at the End of Life

HMOs in California, particularly Kaiser, have developed approaches to end-of-life care that allow them to use far fewer inpatient resources than fee-for-service providers.
Published Online: August 01, 2008
Kateryna Fonkych, PhD; June F. O??Leary, PhD; Glenn A. Melnick, PhD; and Emmett B. Keeler, PhD

Objective: To estimate the effect of independent practice association (IPA) model HMOs and the Kaiser Foundation Health Plan’s group model on inpatient utilization of Medicare beneficiaries in the last 2 years of life, compared with traditional fee-for-service (FFS) coverage.

Study Design: Data from the Centers for Medicare & Medicaid Services were linked to inpatient discharge data from the California Office of Statewide Health Planning and Development for 1991-2001. A sample of aged Medicare beneficiaries who died between January 1998 and June 2001 and were continuously enrolled during the 2 years before death in (1) FFS (n = 234,498), (2) an IPA (n = 109,577), or (3) Kaiser (n = 29,434) were selected.

Methods: The probability of at least 1 hospitalization, number of inpatient days given at least 1 hospitalization, and total inpatient days per year in the last 2 years of life were estimated for each subgroup. A 2-part regression model, which adjusted for age, sex, Medicaid status, race, ethnicity, and chronic condition associated with the last hospitalization, was applied to determine the HMO-FFS difference in inpatient utilization during the last 2 years of life.

Results: During their last 2 years of life, decedents in IPAs and Kaiser used approximately 34% and 51% fewer inpatient days, respectively, than decedents in FFS.

Conclusions: Medicare beneficiaries who died while enrolled in an HMO, particularly Kaiser, had many fewer hospital days during the 2 years before death than beneficiaries who died with FFS coverage.

(Am J Manag Care. 2008;14(8):505-512)

End-of-life care is an important issue because it involves costly inpatient care, mainly financed by Medicare, and because there is growing concern among policymakers, clinicians, and consumers regarding its quality.

Using a unique panel dataset, we found that Medicare decedents in HMOs used remarkably less inpatient care in the last 2 years of life (34% to 51%) than similar decedents who received fee-for-service (FFS) care.

Our findings suggest that HMOs in California, particularly Kaiser, have developed approaches to end-of-life care that allow them to use far fewer inpatient resources relative to FFS providers.

Currently, Medicare covers approximately 44 million people, and as the baby boom generation retires and life expectancy increases, the number is predicted to reach 79 million by 2030.1,2 These demographic changes along with rising healthcare costs fuel concern over Medicare’s long-term solvency. Medicare is the main financing mechanism for health services delivered at the end of life, providing coverage for more than 80% of those who die in the United States.3,4 Our data indicate that more than 50% of all Medicare inpatient days are used by people in their last 2 years of life. There is growing evidence that greater Medicare spending at the end of life does not necessarily result in better quality of care or patient satisfaction with care.5-8

Most studies of end-of-life care have focused on decedents with traditional Medicare fee-for-service (FFS) coverage because of incomplete data for Medicare managed care enrollees. Yet managed care is organized in ways that may benefit the delivery of end-of-life care. Lynn and Adamson suggest that the coordination of care across different settings and the types of care present in managed care organizations can improve end-of-life care.9 The Dartmouth Atlas of Health Care shows that regions with more managed care tend to use fewer acute care beds, hospital days (ie, fewer “high-tech” deaths), and physician visits when treating FFS decedents with chronic illnesses.10 Moreover, the quality of care in these regions tends to be higher, as reflected in process measures that are above average. However, little is known about how end-of-life care differs for managed care enrollees compared with those receiving FFS care. This study uses a unique dataset covering all Medicare beneficiaries in California from 1991 through 2001 to estimate the effect of 2 different HMO models on the inpatient utilization of Medicare beneficiaries relative to traditional FFS coverage before death: independent practice association (IPA) HMOs and the group model Kaiser Foundation Health Plan (Kaiser).

Our approach is designed to minimize population (selection) differences between FFS and HMO decedents to isolate the effect of managed care on inpatient utilization near the end of life. Our approach builds on the work of Fisher et al7,8 and other retrospective studies of end-of-life care.1,4,6,10,11 These analyses recognize that at the time of HMO enrollment, HMO enrollees are healthier (favorable selection) than those who remain in FFS, but that as both groups approach death, their health status converges. Much of the favorable selection at HMO enrollment is likely reflected in lower death rates,12 not substantially better health when dying, although some studies have found that better health earlier in life persists later in life.13,14 Therefore, we focused on the last 2 years of life (defined not by calendar year but in 12-month increments before death) and used regression analysis to control for several observable differences in the FFS, IPA, and Kaiser samples.

Data and Study Sample
Medicare data from the Centers for Medicare & Medicaid Services Enrollment Database and the Denominator File were linked to inpatient discharge data from the California Office of Statewide Health Planning and Development.15 As a result, we were limited to measures of inpatient utilization and have no data on costs or other services. We selected Medicare enrollees who died between January 1998 and June 2001 and who satisfied the following criteria: (1) turned age 65 and were entitled to Medicare for at least 5 years before their death, (2) did not have end-stage renal disease, (3) resided in counties with more than 500 HMO enrollees, and (4) were enrolled in a risk HMO (ie, the HMO is paid a predetermined per-member per-month payment.) Given these criteria, the minimum age at death was 70 years. The main sample was further restricted to beneficiaries who remained continuously enrolled either in FFS or an HMO during their last 2 years of life. Fewer than 5% of FFS or HMO decedents switched between systems of care during their last 2 years of life. The final sample included 381,756 Medicare decedents, about 39% of whom were enrolled in an HMO at death. Specifically, 109,577 beneficiaries were enrolled in IPA HMOs, 29,434 in Kaiser, and 8247 in other types of HMOs including group, staff model (other than Kaiser), and demonstration HMOs. HMO enrollees not in IPAs or Kaiser were controlled for in the regression analysis but omitted from the results because together they comprised only 2.2% of the study population and had unsteady enrollment patterns.

Descriptive Analysis
We compared unadjusted inpatient utilization among FFS, IPA, and Kaiser groups during the last and second-tolast years of life, as well as the 2 years combined. Utilization measures include the probability of at least 1 hospitalization, mean number of hospitalizations, and mean number of total inpatient days per hospitalization and per period. Hospitalizations with zero length of stay were excluded. For those with at least 1 hospitalization during the 2 years before death, we calculated the distribution of multiple hospitalizations for the FFS, IPA, and Kaiser samples. We also present the distribution of 11 non–mutually exclusive chronic conditions based on all diagnosis codes from the last hospitalization.6,16

Statistical Analysis
To correct for population differences that might be associated with health status and care preferences between FFS and HMO decedents, we applied regression analysis. The distribution of inpatient days was skewed; therefore, a 2-part model was applied.17,18 The first part was a logit that predicts the probability of at least 1 hospitalization during the last 2 years of life. The second part was an ordinary least squares regression of the logarithm of total inpatient days for all hospital stays for those who were hospitalized at least once during the last 2 years of life. Both parts of the model were estimated using robust standard errors by FFS and HMO plan to account for correlation within plans and by county-fixed effects to control for nonmeasured geographic and market differences across regions.19,20 In order to transform the change from the logarithm of days into percent change in days we exponentiated the second-part regression coefficient and applied a smearing estimate. We then recombined the resulting estimate with the predicted change in probabilities from the first part of the model to yield the estimates of the HMO effect on total days.21

The key independent variables indicate whether a decedent was enrolled in a particular type of HMO or FFS. If a beneficiary switched between different types of HMOs, this variable is expressed as a share of the 2-year period that he/she spent in a given plan. Control variables include race (black or not), ethnicity (Hispanic or not), sex (female or not), age at death, an indicator for age at death greater than 80 years, and year of death, as well as 2 Medicaid variables. Medicaid buy-in status was recorded monthly and entered into the model as the ratio of the number of months eligible for Medicaid divided by 24 months. In addition, because enrollment of Medicare beneficiaries into Medicaid varies with system of care and age, we also included an indicator for whether the decedent was “originally” Medicaid eligible. This variable was equal to 1 if the decedent was Medicaid eligible in the same month he/she became entitled to Medicare, or in January 1991 (the first month of data) if Medicare entitlement occurred prior to that time. The second part of the regression included the same variables, as well as whether a beneficiary was admitted from a nursing home, indicators for 11 chronic conditions, and whether a decedent had more than 1 of the 11 chronic conditions.6,16

Descriptive Statistics
There are some differences in the composition of the FFS and HMO samples (Table 1). The mean age at death was higher for FFS decedents compared with IPA and Kaiser decedents (83.3 years vs 81.9 years and 80.6 years, respectively). This is because the HMO population was younger; thus, fewer HMO enrollees could have reached the age of 80 years by 1998. Approximately 59%, 53%, and 48% of the FFS, IPA, and Kaiser samples were female, respectively. At 7.2%, the Kaiser sample had proportionately more blacks than either the FFS (5.6%) or IPA (3.9%) samples. Medicare beneficiaries who received Medicaid benefits under the state buy-in agreement for at least 1 year of their last 2 years of life constituted almost a third of the FFS sample, but only about 8% of the IPA and Kaiser samples. Overall, the distribution of chronic conditions was fairly similar among the 3 samples.

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