Patterns of Expenditures and Use of Services Among Older Adults With Diabetes: Implications for the transition to capitated managed care

OBJECTIVE: To examine health care use and expenditures among older adults with diabetes, investigate factors that are associated with higher expenditures, and describe the policy implications of caring for this population under managed care. RESEARCH DESIGN AND METHODS: A cross-sectional analysis of expenditures for individuals with diabetes over age 65 years from a nationwide 5% random sample of Medicare beneficiaries was conducted during 1992. All components of medical care covered under Medicare were examined. Multivariate analysis was used to assess the contribution of age, race, sex, number of diabetic complications, and comorbidity (Charlson Index) on total expenditures. RESULTS: On average, individuals with diabetes (n = 188,470) were 1.5 times (P < 0.0001) as expensive as all Medicare beneficiaries (n = 1,371,960). However, there were wide variations, with the most expensive 10% of beneficiaries with diabetes accounting for 56% of expenditures for individuals with diabetes and the least expensive 50% accounting for 4%. Acute care hospitalizations accounted for the majority (60%) of total expenditures, whereas outpatient and physician services accounted for 7 and 33%, respectively. There were no differences in the number of complications for all older adults with diabetes compared with those with the highest expenditures. However, the average number of hospitalizations was 1.6 times (0.53 vs. 0.34; P < 0.0001) higher, and the average length of stay was 2 days longer, among older adults with diabetes (P < 0.0001). In the regression model, age and male sex (factors currently used to set payment rates for Medicare managed care enrollees), and number of diabetic complications, but not race, were positively related to expenditures, yet had minimal predictive power (R2 = 0.0006). The addition of the Charlson Index, also positively related to expenditures, was able to explain up to 20% of the variation in total expenditures (R2 = 0.196). CONCLUSIONS: There are large variations in expenditures among older adults with diabetes. Because elderly beneficiaries with diabetes are more expensive than the average older adult, current Medicare capitation rates may be inadequate. To avoid selection bias and under-treatment of this vulnerable population under managed care, methods to construct fair payment rates and safeguard quality of care are desirable.