Advance Directives Cut Medicare Costs

When healthcare reform was debated across the country in 2009 and 2010, one of the flash points was end-of-life care. Healthcare experts have promoted the use of advance directives, which let doctors know how much treatment is desired by patients at the end of life. While this went too far for some, directives do hold the promise of reducing Medicare costs at the end of life, according to a new study.

University of Michigan, Ann Arbor, researchers conducted the analysis. They didn’t just look at whether advance directives reduced costs — they also examined how the directives affected costs in various regions across the country. This place-based approach yielded interesting results.

Regions with high levels of end-of-life spending were the most sensitive to advance planning. Patients with directives in these areas were less likely to die in a hospital and more likely to die in a hospice, and they cost Medicare less money.

“In the most expensive regions, Medicare spending was modestly lower for patients who had prepared an advance directive,” said Lauren Hersch Nicholas, the study’s lead author. “In some parts of the country, people who had living wills were less likely to die in a hospital and more likely to be in hospice care. It can be really important for people to have an advanced directive ensuring they receive care that’s consistent with their preferences.”

What was the actual difference in cost? Without an advance directive, end-of-life care in high-spending regions averaged $39,518. With such a directive, the care cost $33,933, or $5,585 less.

Interestingly, this advance planning didn’t necessarily save money in regions of the country that spend a moderate or small amount during patients’ final days. “The wide variation in end-of-life Medicare expenditures across geographic regions suggests that default treatment levels also vary regionally,” said the article, published in the October 5 issue of the Journal of the American Medical Association. “Advance directives specifying limits at the end-of-life may have their greatest impact in regions where the norms are to provide very high-intensity end-of-life treatment.”

The paper looked at data from the Health and Retirement Study for more than 3,000 Medicare recipients who died between 1998 and 2007.


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