Predicting expenditures for medicare beneficiaries with diabetes: A prospective cohort study from 1994 to 1996

OBJECTIVE: To describe health care expenditures and utilization patterns among older adults with diabetes and to examine factors associated with expenditures over a 3-year period. RESEARCH DESIGN AND METHODS: We conducted a prospective cohort study of health care expenditures and utilization by diabetic patients from a random nationwide sample of aged Medicare beneficiaries from 1994 to 1996. All services covered by the Medicare program were examined. Multivariate regression was used to assess the contribution of patient characteristics in 1994 on Part B, inpatient, and total expenditures in 1995 and 1996. RESULTS: Per capita expenditures for beneficiaries with diabetes (n = 169,613) were 1.7 times greater than those for those beneficiaries without diabetes (n = 968,832) in 1994. This ratio remained fairly constant over the 2 years of follow-up. Expenditures for beneficiaries with diabetes were highly skewed. However, few of these individuals remained in the highest expenditure quintile over the 2 years of follow-up. Using multiple regression analysis to adjust for demographic and clinical characteristics, we were able to explain 7% of the variation in total expenditures in 1995 and 6% of the variation in 1996. Using the same model, we were able to explain 10.7% of the variation in Part B expenditures in 1995 and 8% in 1996. CONCLUSIONS: Beneficiaries with diabetes are consistently more expensive than beneficiaries without diabetes. Demographic and clinical factors at baseline are able to predict only a small portion of future expenditures among this population, and the most expensive patients in one year were often not the most expensive in subsequent years. More work is necessary to assure equitable risk adjustment in the calculation of capitation rates for health plans and practitioners who specialize in the care of individuals with diabetes.