Government investment in programs and solutions aimed at improving the
health and well-being of Americans both before and after entry into
Medicare could yield up to $1.4 trillion in savings over 10 years,
according to a report – Potential Medicare Savings Through Prevention
& Health Risk Reduction – released today by the Center for
Health Research (CHR) at Healthways, Inc. (NASDAQ: HWAY).
Based on an actuarial model developed and tested by Ingenix Consulting,
the analysis shows that even modest reductions or delays in the advent
and progression of population health risk can result in significantly
reduced cost, even after accounting for corresponding increases in life
expectancy. The report is the first-ever analysis based on sound
actuarial science to quantify the financial impact of better health and
reduced health risk progression in the Medicare Fee-For-Service (FFS)
population.
The model described in the report utilized Medicare Parts A and B data
from the 5% Sample Limited Data Set for the years 2002–2006, Medicare
Trust Fund enrollment projections and Vital Statistics
age/gender-specific mortality rates to allow estimates of average
Medicare costs based on age and stratified health risk. The model
estimates that, per Medicare FFS beneficiary, the government will spend
an average present value of $174,000 over the course of their tenure in
the program, from age 65 until death. The total lifetime cost to the
nation of the approximately 37.5 million seniors in the Medicare FFS
population in 2005 will be $6.5 trillion.
Those costs will not be evenly distributed across the population. In
2002, half of all Medicare beneficiaries were being treated for at least
five chronic conditions, and the treatment of those individuals
accounted for more than 75 percent of Medicare spending1.
Healthways researchers analyzed the cost impact of changing that mix,
asking what if more people entered Medicare healthier and with fewer
risk factors, and what if programs were implemented to slow the
development and progression of risk factors within the existing Medicare
population?
Working with the senior professional staff at Ingenix, the CHR developed
several scenarios for the model to test. These scenarios examined the
impact of varying distributions of population risk for the population
entering Medicare at age 65 as well as varying rates of risk progression
for all beneficiaries.
The calculations yielded a range of potential savings that could accrue
from a combination of health promotion, prevention and chronic care
management initiatives prior to and/or after the age of 65.
