Understanding Trends inMedicare Spending, 2007-2014

Objectives. To analyze the sources of per-beneficiary Medicare spending growth between 2007 and 2014, including the role of demographic characteristics, attributes of Medicare coverage, and chronic conditions. Data Sources. Individual-level Medicare spending and enrollment data. Study Design. Using an Oaxaca-Blinder decomposition model, we analyzed whether changes in price-standardized, per-beneficiary Medicare Part A and B spending reflected changes in the composition of the Medicare population or changes in relative spending levels per person. Data Extraction Methods. We identified a 5 percent sample of fee-for-service Medicare beneficiaries age 65 and above from years 2007 to 2014. Results. Mean payment-adjusted Medicare per-beneficiary spending decreased by $180 between the 2007-2010 and 2011-2014 time periods. This decline was almost entirely attributable to lower spending levels for beneficiaries. Notably, declines in marginal spending levels for beneficiaries with chronic conditions were associated with a $175 reduction in per-beneficiary spending. The decline was partially offset by the increasing prevalence of certain chronic diseases. Still, we are unable to attribute a large share of the decline in spending levels to observable beneficiary characteristics or chronic conditions. Conclusions. Declines in spending levels for Medicare beneficiaries with chronic conditions suggest that changing patterns of care use may be moderating