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The Health Economics of Palliative Care

The Health Economics of Palliative Care

Often, Congressional financing of programs can be
secured only with indirect arguments. In the 1950s, the Eisenhower
administration convinced Congress to fund the interstate highway system by
claiming it was essential to enable Americans to evacuate cities in case of a
nuclear attack by the Soviet Union. In the 1970s, advocates trying to persuade
Congress to pay for dialysis argued that the procedure would be inexpensive, and
that people would return to work and pay for themselves. Similarly, in the early
1980s, proponents of hospice advocated Medicare coverage because it was cheaper
and better care for the dying.

Dr. Payne and coauthors take on the ambitious task of assessing the economic
outcomes of a range of palliative therapies, focusing especially on hospice care
and coordinated care.

Hospice and Cost Savings

In the 1980s and 1990s, many prominent health economists, physicians, and
bioethicists argued that with all the money being spent on hospital and
intensive care for the dying, hospice would surely save substantial sums.[1] As
2 decades of research shows, this view relies on several mistaken assumptions.

The first error—one committed by Payne and colleagues—is to substantially
overestimate the actual health-care expenditures on terminally ill patients.[2]
Some have claimed that up to 70% of all health-care costs for dying patients are
spent in the last year of their life.[3] Payne et al state that "52% of
Medicare dollars are spent on patients in their last 60 days of life." This
is erroneous.

In truth, end-of-life expenditures account for about 10% to 12% of all
health-care spending and 27% of Medicare expenditures.[4] In fact, Medicare data
reveal that expenditures in the last 60 days of life account for 52% of
expenditures in the last year of life, which translates into 13% of all Medicare
expenditures. While these figures are high—amounting to tens of billions of
dollars per year—they are not nearly as high as claimed. One consequence is
that if the United States spends less than imagined on dying patients, then
potential savings are also less.

A second error is to suggest that because there are high expenditures, there
also must be high savings. Three randomized trials of hospice and advance
directives have demonstrated no cost savings compared to conventional care,[5-7]
whereas nonrandomized studies of hospice show savings of 0% to 63% during the
last month of life. All studies have important methodologic limitations,
including selection bias, problematic time frame of assessment, the types of
medical costs assessed, and generalizability.[8] Despite these limitations,
there is general agreement among investigators that during the last month (or
less) of life, hospice yields cost savings of 25% to 50%. The cost savings
decrease to 10% to 17% during the last 6 months of life, and finally decrease to
0% to 10% when assessed over the last 12 months of life.[8]


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