Direct expenditures related to otitis media diagnoses: Extrapolations from a pediatric medicaid cohort

Background. Treatment of otitis media in children is associated with substantial expenditures because of its high frequency during childhood. Vaccines against respiratory pathogens causing otitis media are now being developed. Information about otitis media-related medical expenditures will be needed to determine the cost-effectiveness of these preventive interventions. Methods. This study used utilization data from claims to impute otitis media-related expenditures for medical visits, pharmaceuticals, and surgical procedures for 87 057 children 13 years of age and younger who were continuously enrolled in Colorado's fee-for-service Medicaid program during 1992. International Classification of Disease, Ninth Revision diagnostic codes were used to identify visits for otitis media. An antibiotic was considered to have been prescribed to treat otitis media if it was dispensed up to 24 hours before or within 48 hours after a physician encounter showing a diagnosis of otitis media. All tympanostomies, mastoidectomies, and adenoidectomies were assumed to be related to otitis media. Expenditures were imputed from utilization using a Medicaid fee schedule. National expenditures for 1992 to treat otitis media were extrapolated from Colorado's Medicaid data. We adjusted for differences between Colorado and the United States as a whole in terms of price, number, and intensity of services; for differences in reimbursement rates by service between Medicaid and private insurance; and for differences in utilization between Medicaid enrollees and the uninsured. To provide a more current expression of medical expenditures for otitis media, we inflated the 1992 expenditure estimates to 1998 dollars using the Consumer Price Index published by the US Bureau of Labor Statistics. Results. Twenty-eight percent of children experienced at least 1 episode of diagnosed otitis media. The proportion of children with a diagnosis of otitis media was highest (42%-60%) in the 7-month to 36-month age range. The proportion was also higher among white (34.5%) and Hispanic (25.3%) children than among black children (18.5%), as well as among rural (34.5%) compared with urban children (27.2%). Children 19 to 24 months of age incurred the highest total annual expenditures per child with otitis media ($239.68). Expenditures for drugs, visits, and procedures were all highest for this group. The per-patient cost to Medicaid was greater for visits than for drugs or procedures across all age groups. Total per-patient expenditures were higher for males ($174.67) than for females ($154.47) and higher for white children ($176.59) than for Hispanic ($154.12) or black children ($134.44). The differences among the ethnic groups can be attributed almost entirely to differences in expenditures for procedures and drugs. Although mean expenditures per patient varied substantially by some patient characteristics (eg, race), these differences accounted for only a small fraction of the enormous variation in costs per patient. Including children with and without otitis media, age-specific estimated expenditures per child peaked among children 1 ($132.94) and 2 years of age ($88.72). Children 3 to 6 years of age incurred expenditures only one third as great as those incurred by children 1 year of age. Total national expenditures were estimated to have been approximately $4.1 billion in 1992 dollars and $5.3 billion in 1998 dollars. Over 40% of national expenditures to treat otitis media in children younger than 14 years of age were incurred for children between 1 and 3 years of age ($453 per capita in 1992 dollars over these 2 years vs $1027 for all years of age from 2 to 13). Nationally, expenditures for visits remained the largest component of expenditures. Limitations. This study assessed expenditures from the point of view of the health care system; that is, no social costs, such as lost work time, or expenditures not normally covered by insurance, such as those for transportation, were included. The study captured expenditures to treat otitis media during a calendar year and should not be interpreted as the cost to treat episodes of otitis media. Our reported expenditures may have captured only part of an episode straddling 2 calendar years, or, alternatively, they may cover several episodes. The figures reporting 1992 expenditures expressed in 1998 dollars should not be taken as an estimate of 1998 expenditures to treat otitis media. The approach used to adjust the expenditures did not take into account changes in the medical practice environment, such as would occur with a movement of the population from predominantly fee-for-service practice to managed care or the introduction of new treatment practices. It also did not account for changes in insurance status, eg, an increase in the proportion of uninsured children, or for population increases. Most importantly, our estimates of expenditures are based on treatment of otitis media as it was practiced in 1992, before the current practice guidelines were promulgated. The effect of the guidelines on physician practice in 1992 may, however, not have been substantial. In 1998, Christakis and Rivara found that only 50% of pediatricians were aware of the otitis media guidelines, and of these, only 28% believed that they had changed their practice as a result of the guidelines. It is important to remember that our estimates are based on 1992 Medicaid utilization. Given Medicaid's low reimbursement to primary care physicians at that time, doctors would have had little financial incentive to see patients more often than necessary. Thus, insofar as practice guidelines encouraged fewer visits, Medicaid utilization may already reflect close adherence to the practice guidelines. Conclusions. Because 40% of expenditures to treat otitis media are incurred between 1 and 3 years of age, vaccines designed to reduce the incidence of otitis media are most likely to be cost-effective if they can be administered before the child's first birthday. Because visits are the most costly category of service for all payers, otitis media case management guidelines should emphasize reducing unnecessary visits, for instance, by improving physician training in pneumatic otoscopy, which has been shown to be critical to an accurate diagnosis of otitis media, and by scheduling follow-up visits for children who have become asymptomatic 3 to 4 weeks after diagnosis rather than after 10 to 14 days, allowing time for resolution of the middle ear effusion.