As the Medicare program struggles to control expenditures, there is increased focus on opportunities to manage patient populations more efficiently and at a lower cost. A major source of expense for the Medicare program is beneficiaries at end of life. Estimates of the percentage of Medicare costs that arise from patients in the last year of life differ, ranging from 13% to 25%, depending on methods and assumptions. We analyze the most recently available Medicare Limited Data Set to update prior studies of end-of-life costs and examine different methods of performing this calculation. Based upon these findings, we conclude that higher estimates that take into account the spending over the 12 months leading up to death more accurately reflect the full cost of a patient’s last year of life. Comparing current year costs of decedents with Medicare’s current year costs understates the full budgetary impact of end-of-life patients. Because risk-taking entities such as Medicare Advantage plans and Accountable Care Organizations (ACOs) need to reduce costs while improving the quality of care, they should initiate programs to better manage the care of patients with serious or advanced illness. We also calculate costs for beneficiaries dying in different settings and conclude that more effective use of palliative care and hospice benefits offers a lower cost, higher quality alternative for patients at end of life.

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Medicare's resource-based relative value scale (RBRVS) was implemented 1 January 1992 for physician payment using a conversion factor of $31 for each relative value unit (RVU). We calculated a conversion factor of $42.24 for The Travelers Insurance Company's group health plan business using the RBRVS methodology and the calendar year 1990 Travelers Large Case Norms Extract of active employees. This DataWatch describes two important applications of the relative value scale for private insurers: for pricing and for analyzing claims expenditures. L egislation passed by Congress in 1989 (the Omnibus Budget Reconciliation Act of 1989) mandated the resource-based relative value scale (RBRVS) for reforming physician payment under Medicare. Congress had noted the inequities and inflationary consequences of reimbursing physicians based on "reasonable and customary" charges. The RBRVS methodology was developed by William Hsiao and colleagues at Harvard University. 1 Hsiao's research led to a numerical value or "weight" for more than 7,500 Current Procedural Terminology (CPT-4) codes that reflects the complexity, time, training, and resources used to perform a procedure or provide a service.The goal of this study is to describe how the RBRVS could be used by private insurers for pricing and for studying variations in claims expenses. All pricing applications rely on a conversion factor to convert relative values into dollars. Hence, a conversion factor was calculated for The Travelers Insurance Company's group health plan business that is "benefitneutral" (that is, it does not increase or decrease the amount the insurer covers for all claims), based on the calendar year 1990 Travelers Large Case Norms Extract of active employees.We also show how the RBRVS can be the basis for claims analyses. We demonstrate how "variance analyses" that are based on the RBRVS explain variations in total charges based on differences in price (average amount of covered charges per relative value unit [RVU]), volume (average number of RVUs per enrollee), and intensity (average number of RVUs per service).