The Impact of Demographic Change on Health Insurance...

The Impact of Demographic Change on Health Insurance Costs

Svenja Rodrig, DKV Deutsche Krankenversicherung AG, CologneHans-Olaf Wiesemann, HALLESCHE KVaG, Stuttgart

IAAHS Colloquium, Dresden, 28th April 2004

Overview

Ø Introduction

Ø Consequences of Demographic Change

Ø Analysis of Two DKV Portfolios

Ø Conclusions

Ø Reference

Introduction

Ø Costs for health care increase faster than GDP, health

insurance premiums increase faster than personal net

income.

GDP = Gross domestic product

Introduction

Ø Causes of this development

• Increasing supply of health care due to - More frequent claims - Augmented treatment costs- Medical progress- Increasing number of health care professionals and

facilities

• Increasing demand of health care due to- Demographic change- Claims inflation.

Introduction

Ø Focus on relation between demographic change and health insurance outlays.

Ø Examination of the following thesis:An increased life expectancy does not have any influenceon the costs of health insurance due to the following reason: a large share of total life-time individual health care expenditure is spent during the last months of life. It is irrelevant for health care spending if such costs appear for a person at the age of 60 or 90.

Consequences of Demographic Change

Ø Two opposing theses:

• Compression of morbidity:Life expectancy increases, but the period of time of morbidity before death decreases.

• Extension of morbidity:Life expectancy increases, but the period of time of morbidity increases as well.

Ø Steeper cost/expenditure profiles in health insurance.

A cost/expenditure profile indicates the - on a fixed age -standardized claim per capita paid for health care. The escalation of those costs over time shows that elderly insureds become more cost-intensive than younger age-groups.

22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97

1983 1988 1993 1999

Ø Steeper cost/expenditure profiles in health insurance have three main reasons:

• Higher medical costs in particular for elderly patients.

• Higher incidence of geriatric diseases e. g. Dementia (Alzheimer’s disease), Parkinson’s disease, Cancer.

• Deterioration of the state of elderly people’s health.

Ø Connection between the two theses and steeper cost/expenditure profiles in health insurance (SCP):

• Compression of morbidity ó SCP- Constant health costs in the period of time: No (negative) effect on cost

profiles and decrease in health insurance costs of elderly people.- Increasing health costs over the course of time: Net effect on cost

profiles uncertain (either reduction of duration of treatment (morbidity) or increase in intensification and in price of medical treatment).

• Extension of morbidity ó SCP- Increase in duration of treatment ⇒ higher health costs

⇒ negative effect on cost profiles.

Analysis of Two DKV Portfolios

Ø Study of two medical expenses insurance tariffs for out-patient and in-patient treatment.

Ø Study of a section of both portfolios meeting the following three conditions:• People have been insured with DKV since before 1990.• People were insured with the same tariff between 1993 and

1999.• The moment of death on average was in the middle of

the year 1999.

Ø Study of three different portfolios:survivors, deceased in 1999 and the entire portfolios.• 5-year age-groups from age 40 to 99.• Large number of insured people representative of the entire

population (1999) concerning distribution among age, region and deceased, apart from sex.

Ø Comparison of health costs caused by the insureds who survived with those who died in 1999.

Ø Claims per capita over the course of time anddependent on age

• Analysis in two dimensions: time and age.• Claims per capita standardized on the age-group

45 to 49.• Comparison of the portfolio with and without the

deceased.• Calculation of the gradient-coefficient of a straight

regression line.

1999100

Standardized claim per capita

age-groups

Development of the cost profile without deceased of the in-patient tariff

Results:• Steeper cost profiles especially for the in-patient tariff.• For the out-patient tariff: Significant change of cost

profile over the course of time only for elderly insureds.

Interpretation of the results:• No significant differences between the development of the

cost profiles over the course of time for the portfolio with or without the deceased (for the in-patient and out-patient tariff).⇒ Unchanged high level of health insurance costs

even if the intensive medical treatment of the elderlyinsureds immediately before death is not taken intoaccount.

Ø Claims per capita over the course of time anddependent on age of the two tariffsInterpretation of the results:

⇒ Proves thesis of extension of morbidity.⇒ No shift of health insurance costs into the future

in case of rising life expectancy.(Disproportionate rise of health insurance costs).

⇒ Steeper cost profiles reduce the financialstability of the health insurance systems as a result ofdemographic change.

Ø Claims per capita of the portfolio with and without deceased dependent on age

Results: • In-patient tariff:

- Health costs with deceased are always higher than without deceased.

- The cost profile is steeper.• Out-patient tariff:

- The cost profile with deceased is flatter than without deceased.

40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99

age-groups

Portfolio without deceased Portfolio with deceased

Comparison of the cost profiles with and without deceased of the in-patient tariff

Ø Claims per capita of the portfolio with and without deceased dependent on age

Interpretation of the results: • Insignificant differences between the cost profiles of the

portfolio with and without deceased for the in-patient and the out-patient tariff.⇒ Elderly insureds cause high claims independent of

proximity to death due to typical geriatric diseases and improved possibilities of medical treatment. .

⇒ Increase in frequency of geriatric diseases because ofhigher life expectancy.

Ø Share of insureds who submitted a claim in entire portfolio according to age over the course of time

Results:• In-patient tariff:

- Increase in share of survivors who submitted an in-patient claim with advancing years over the course of time.

- High percentage of deceased who submitted an in-patient claim independent of age over the course of time.

Share of deceased who submitted a claim out of all deceased in the in-patient tariff

199940-44

85-89 90-

94 95-99

age-groups

Share of insureds who submitted a claim

Results: • Out-patient tariff:

- Slight increase in share of survivors who submitted an out-patient claim with advancing years over the courseof time.

- Evident increase in share of younger deceased who submitted an out-patient claim over the course of time.

Interpretation of the results: • High share of survivors and deceased who submitted an

in-patient claim with advancing years over the course of time⇒ Proves thesis of extension of morbidity.⇒ Serious future problems of the financial status

of the (statutory) health insurance system.

Ø Share of insureds who submitted a claim in entire portfolio according to age:Comparison of deceased and survivors

Results:• In-patient tariff:

- Significant differences between the share of survivors and deceased who submitted an in-patient claim in 1999.

Share of insureds who submitted a claim in the in-patient tariff (1999)

40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99

age-groups

Share of survivors who submitted a claim Share of deceased who submitted a claim

Share of insureds who submitted a claim

Results:• Out-patient tariff:

- High share of survivors submitted an out-patient claim in entire portfolio (47 % of insureds between 40 and 44 years, 80 % of elderly insureds).

- Approximately 90 % of deceased submitted an out-patient claim in 1999 - almost independent of age.

- Difference between deceased and survivors who submitted an out-patient claim of elderly insureds is only 10 %.

Interpretation of the results: • Significant increase in share of survivors who submitted a

claim with advancing years plus extension of life expectancy⇒ Continual increase of elderly insureds over the course of

time with the consequence of a further increase of insuredswho submitted a claim.

⇒ Proves thesis of extension of morbidity.

Ø Claims per capita of insureds who submitted a claim in entire portfolio according to age and over the course of time

Ø Calculation of ratio of claims per capita per age and year of deceased and survivors who submitted a claim.

Results: • In-patient tariff:

- Increase of the ratio to the disadvantage of deceased who submitted an in-patient claim for almost every age-group over the course of time.

Ratio of claims per capita of deceased and survivors who submitted a claim in the in-patient tariff

age-groups

Claims per capita deceased/Claims per capita survivors

Results: • Out-patient tariff:

- Increase of the ratio to the disadvantage of deceased who submitted an out-patient claim only for lower age-groups over the course of time.

Interpretation of the results: • In-patient treatment of deceased became more expensive

than of survivors for all age-groups over the course of time⇒ Intensification of medicine especially in the field

of hospital treatment and for critically ill people shortly before death.

⇒ Proves thesis of extension of morbidity(not detectable in the field of out-patient treatment).

Ø Claims per capita of insureds who submitted a claim in entire portfolio according to age:Comparison of deceased and survivors

Ø Calculation of ratio of claims per capita of deceased and survivors who submitted a claim per age-group in 1999.

Results: • Decrease of the ratio of deceased and survivors who

submitted a claim with advancing years with the consequence of adjustment of claims for both groups.

Results: • The claims of survivors exceed the claims of deceased

especially for the insureds of advanced years in 1999 ⇒ Less efforts for treatment of critically ill elderly people.

• Development of claims of survivors contrary to the development of claims of deceased with advancing years.

Ratio of claims per capita of deceased and survivors who submitted a claim in 1999

40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99

Out-patient tariff AM1 In-patient tariff SM6

Claims per capita deceased/ Claims per capita survivors

age-groups

Interpretation of the results: • The ratio of claims per capita of deceased and survivors

converges to one with advancing years; considerably high health costs generated even by less seriously ill survivors.⇒ Deceased claim in-patient benefits in particular;

not only deathly sick insureds cause enormoushealth insurance costs.

⇒ Financial stress for health insurance systems.

Ø Development of claims of deceased in 1999

Ø Closer examination of the development of claims per capita of two older age-groups (75 to 79, 85 to 89 respectively).

Results:• In-patient tariff: Deceased in 1999 generated considerably higher

health costs within the last six years before death – especially in the 75 to 79 age-group.

• Examination of the claims only of deceased in 1999; we left out of consideration that some survivors certainly died within the following years (examination of the moment).

Excess risk of deceased in 1999 in comparison with survivors(age-group 75 to 79)

Tariff Year of death

1 year before death

2 years before death

Out-patient

55 % 122 % 98 % 98 % 58 % 55 % 66 %

In-patient

424 % 277 % 186 % 161 % 117 % 181 % 30 %

Claims per capita of deceased in 1999 and survivors between 1993 and 1999 in the in-patient tariff

1993 1994 1995 1996 1997 1998 1999

in EUR

Claims per capita without deceased (75 to 79-year-old) Claims per capita of deceased (75 to 79-year-old)Claims per capita without deceased (85 to 89-year-old) Claims per capita of deceased (85 to 89-year-old)

Interpretation of the results:• Deceased in 1999 generated considerably higher health

costs not only in the last two but also within the last six years before death. The claims per capita of the elderly survivors increase evidently with advancing years.⇒ Rising life expectancy has a raising effect on

health insurance costs.

Conclusions

Ø High health insurance costs are not primarily influenced by the deceased.

Ø Disproportionate inflation of health insurance costs with advancing years is particularly dependent on age and not on the proximity to death.

Ø Steeper cost profiles over the course of time(especially for the in-patient tariffs)• Effect is not only caused by insureds shortly before death.• Comparable development for the portfolio with and without

deceased.

Conclusions

Ø Insignificant difference between the claims per capita of the portfolio with and without deceased.• Out-patient tariff: Difference independent of age.• In-patient tariff: Slight increase with advancing years.

Ø Increase in share of insureds who submitted a claim over the course of time – especially for the in-patient tariff.

Ø Increase in share of all insureds – survivors and deceased -who submitted a claim with advancing years – for the in-patient tariff in particular.

Conclusions

Ø Out-patient tariff:The claims per capita of the survivors who submitted a claim are considerably higher than the claims per capita of the deceased who submitted a claim.

Ø In-patient tariff:The deceased who submitted a claim cause lower claims per capita than the survivors who submitted a claim.

Ø Disproportionate increase in health insurance costs of the treated deceased compared with the treated survivors over the course of time (observation period 1993 to 1999).

Conclusions

Ø In-patient tariff:Deceased in 1999 already generated considerably higher health costs several years before death.

Ø Out-patient tariff:Nonuniform picture.

Ø Out-patient tariff:Financial stress due to higher life expectancy cannotbe directly derived from the above-mentioned results.

Ø In-patient tariff:Longer life expectancy and other factors like progress in medical technology pose a severe threat to the financial stability of health insurance.

Reference

S. Rodrig/H.-O. Wiesemann: Der Einfluss desdemographischen Wandels auf die Ausgaben derKrankenversicherung, Zeitschrift für die gesamteVersicherungswissenschaft, 2004 (1), p. 17-46

End of presentation

The Impact of Demographic Change on Health Insurance...

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