3179 — The Persistence of High Costs among Veterans Using the VA

Pal Chee C, VA Palo Alto; Almenoff PL, VA Office of Operational Analytics and Reporting; Wagner TH, VA Palo Alto;

Objectives:
Across health care systems, the top 5% most costly patients consistently account for roughly half of all health care spending. In light of current interest in health care spending and innovations to reduce the health care costs of patients with the highest costs, this study evaluates the distribution of health care spending per Veteran and the persistence of high costs among Veterans using the VA.

Methods:
We calculate annual VA and Medicare health care costs for all Veterans using the VA. VA costs include inpatient, outpatient, pharmacy, and contract-care costs from 2005-2012. Medicare costs include Medicare payments for inpatient and outpatient services (Part A and Part B) from 2005-2011. For each year, we also calculate the average, median, 80th percentile, 95th percentile, and 99th percentile of costs, as well as the cost ranking for each Veteran.

Results:
Average VA health care costs per Veteran are highly skewed. The VA's top 5% highest cost patients consistently accounted for roughly half of all VA costs in each year. On the other hand, roughly 80% of Veterans had costs below the average in each year of the study period. Similar patterns hold for combined VA and Medicare costs. High costs are fairly persistent. Among Veterans with VA costs in the top 5% in 2008, 36% remained in the top 5% one year after and 26% two years after. The persistence of high combined VA and Medicare costs was slightly lower (30% of the top 5% in 2008 remained in the top 5% one year after and 21% two years after), suggesting that some VA high cost patients continue to rely mainly on the VA for their care after the onset of high costs.

Implications:
VA and Medicare spending is very high for the highest cost Veterans using the VA. Although the persistence of high costs is limited by high mortality rates among high cost patients, high costs among Veterans are fairly persistent.

Impacts:
Understanding which high cost patients have persistent versus transient high costs and what services they receive is crucial to the design of innovations aimed at reducing the costs of the highest cost patients.