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 ad ults with diabetes, investigate factors that are associated with highe r expenditures, and describe the policy implications of caring for thi s 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 beneficia ries was conducted during 1992. All components of medical care covered under Medicare were examined. Multivariate analysis was used to asses s 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). Ho wever, there were wide variations, with the most expensive 10% of bene ficiaries with diabetes accounting for 56% of expenditures for individ uals with diabetes and the least expensive 50% accounting for 4%. Acut e care hospitalizations accounted for the majority (60%) of total expe nditures, whereas outpatient and physician services accounted for 7 an d 33%, respectively. There were no differences in the number of compli cations for all older adults with diabetes compared with those with th e highest expenditures. However, the average number of hospitalization s was 1.6 times (0.53 vs. 0.34; P < 0.0001) higher, and the average le ngth 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 nu mber of diabetic complications, but not race, were positively related to expenditures, yet had minimal predictive power (R-2 = 0.0006). The addition of the Charlson Index, also positively related to expenditure s, was able to explain up to 20% of the variation in total expenditure s (R-2 = 0.196). CONCLUSIONS - There are large variations in expenditu res among older adults with diabetes. Because elderly beneficiaries wi th diabetes are more expensive than the average older adult, current M edicare capitation rates may be inadequate. To avoid selection bias an d undertreatment of this vulnerable population under managed care, met hods to construct fair payment rates and safeguard quality of care are desirable.