End of life costs

While doing research on the relationship between age and health spending, I discovered that most countries spend less money on a 80 year old than a 70 year old (hospital spending during a given year). This may not be too surprising: They may die from different dieases, they may be too fragile to receive treatment, and (more controversially) expected remaining life years may be used in a rational calculation of costs and benefits before deciding on a treatment. Now, it is easy to suggest possible explanations, but more difficult to determine to what extent they are true.

In any case, I was surprised not so much by the pattern, but by the size of the effects. In Norway average end of life spending on a 90 year old is half of the spending on a 70 year old.

By the way: The pattern in the US is the same, but the slope is not as steep (30% reduction vs. 50% in Norway between 70 and 90 year olds). Many people suggest it has something to do with culture, which may be true but it is often just supported with anecdotes.

Another possible explanation is the fee-for-service system which creates a financial incentive for the hospital to continue with treatment even when it is very unlikely to yield benfits. Combined with an insurance system in which the patient or her family do not have to pay, this means that the central actors have a motive to continue even when there is little hope. In a (Norwegain) DRG system the incentive is the opposite: To provide as little as possible since the reimbursement is fixed and does not increase even if the patient stays for a long time. One system may overprovide, the other may underprovide and we do not know which is closer to the optimal point, but there seems to be a clear difference in the spending pattern.

Anyway, here is the graph I made based on Norwegian data (Average hospital spending in 2010 for all people in that age group i.e. not only hospital patients)