Abstract: The number of individuals aging into the Medicare Program is projected to increase dramatically between 2010 and 2030 due to the aging of the “baby boomers.” As a result, the total number of Medicare beneficiaries is projected to grow from the 2008 level of 45 million to nearly 80 million by 2030. Further, the well-known burden of chronic disease in the Medicare population - data from 2002 showed that half of Medicare beneficiaries had been treated for at least 5 chronic conditions and this population accounted for more than 75% of Medicare spending3 – will become an even greater challenge as a result of increasing prevalence rates for these diseases. Together, these factors will create a considerable, perhaps unsustainable, financial burden on the program.

Historically, the financial burden on Medicare resulting from the very high prevalence and cost of beneficiaries with chronic disease has generated significant interest in the development of interventions that can reduce those costs. Such initiatives have been proven successful on a small scale. A geriatric case management program offered to Medicare members with multiple comorbid conditions, for example, reduced annual healthcare costs by $7,720 per person compared with eligible nonparticipants. Similarly, the Medication Therapy Management Program of the Centers for Medicare and Medicaid Services (CMS) showed a greater reduction in monthly prescription costs for plan enrollees compared with those who declined the plan.5 Outcomes from CMS Medicare Health Support Pilot are still outstanding. In addition, numerous other analyses show that even modest reductions in the prevalence of obesity or tobacco use would have a profound impact on Medicare costs.

The seemingly inexorable increase in the prevalence of chronic disease and in cost has recently led to recognition by those engaged in the current national healthcare reform debate that an effective solution is going to have to provide for meaningful health and disease prevention strategies in addition to the proven approaches for mitigating the clinical, social and financial costs of disease. This perspective is supported by findings from multiple sources, including a recent Milken Institute Report demonstrating the savings that could accrue from improved preventive care and modest improvements in modifiable risk factors such as unhealthy behaviors. It concluded that such improvements, by the year 2023, could reduce the number of chronic disease cases by 40 million and reduce the costs associated with these diseases (in terms of treatment costs and lost
productivity) by $1.1 trillion annually.

In the present study, we determined the specific healthcare cost savings to Medicare that would result from shifting the Medicare population toward improved health status by reducing risk factors associated with chronic disease. Using standard actuarial modeling, we calculated the present dollar value of the Medicare program for a typical beneficiary enrolled in fee-for-service (FFS) Medicare from beginning of eligibility at age 65 until death. Using the model, we derived specific savings estimates that are based on various risk-reduction scenarios. The model provides important insights on the long-term impact of interventions aimed at reducing health risk levels on the net present value of the Medicare benefit over a lifetime.

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