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The incremental cost of dementia care: evidence from Medicare Advantage and traditional medicare

2018 Conference Presentation

Dementia United States

11 September 2018

The incremental cost of dementia care: evidence from Medicare Advantage and traditional medicare

Norma Coe, University of Pennyslvania, United States

Lindsay White, University of Washington, United States


Background: Understanding the additional acute and long-term care costs due to dementia care is important for policy makers, but difficult to estimate in the US. First, identifying individuals with Alzheimer's disease and related dementias (ADRD) can be difficult in secondary data, since diagnosis can be at different stages of the disease or lacking altogether. Second, isolating the costs due to one disease on a population with many co-occurring chronic conditions can be difficult. Third, the fragmented health care system in the US adds an additional hurdle to the challenge because it is difficult to obtain comprehensive data and be able to make apples-to-apples comparisons between Traditional Medicare and Medicare Advantage plans.

Objectives: Estimate the incremental acute care and long-term care costs of ADRD in a Medicare Advantage and Traditional Medicare populations.

Methods: We harmonize claims data from a Medicare Advantage plan and nationally-representative Traditional Medicare beneficiaries. We use three methods to identify ADRD, including ICD-9 diagnosis codes, survey-based cognitive screening, and medical-based screening. We use methods described by Basu and Manning (2010) for estimating costs under censoring. Costs are estimated using a two-part model separately on two samples: (1) months prior to death or censoring, and again (2) for months in which death occurred. An accelerated failure time model based on the lognormal distribution for time was used to estimate each subject’s survival function after accounting for censoring. We estimate marginal effects from each of the above models using the method of recycled predictions.

Results: We find that the incremental cost of ADRD is $13,000 over the first five years after disease onset in Traditional Medicare. Most of this is driven by increases in inpatient costs and an increase in post-acute care skilled nursing facility use. The incremental cost of ADRD are lower in Medicare Advantage plan if one aligns the insurance coverage definitions. However, because this particular Medicare Advantage plan also covers long-term care skilled nursing homes, overall the incremental costs of ADRD to this plan are much higher, almost $30,000 over the first five years of the disease onset. Over two-thirds of this is due to the additional long-term care skilled nursing facility coverage.

Conclusions: Medicare Advantage plans are able to keep the incremental cost of ADRD care lower than the Traditional Medicare program.