An actuarial perspective on healthcare expenditure in the last year of life

Abstract

The aim of this paper is to investigate the expenditure incurred by health insurers arising from the provision of benefits during the 12 months preceding a beneficiary's death. Concern is expressed in parts of the international literature about the extent of resources directed towards those at the end of life, particularly given increased longevity and technological advancement. Two types of investigation are discussed : first, a comparison of costs in the last year of life with costs in earlier years prior to death and, second, a comparison of decedent and survivor costs within a calendar year. Within each investigation,further detailed analyses were performed with particular emphasis on the distribution of last-year-of life costs by age and category of expenditure. A South African dataset is used to illustrate the suggested methodology. The average cost in the last year of life is found to be 3.3 times higher than the average cost in the second last year of life. Average decedent costs are found to be 17.85 times higher than average survivor costs in 2012, on a risk-adjusted basis. The majority of these costs (83.35% in 2012) form part of the Prescribed Minimum Benefit package.