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Perspectives in Disease Prevention and Health Promotion Final Results: Medicare Influenza Vaccine Demonstration-- Selected States, 1988-1992

MMWR 42(31);601-604

Publication date: 08/13/1993

Table of Contents

Reported by
Editorial Note



Cost To Medicare Of Influenza Vaccine Delivery And Savings


Pneumonia and influenza (P&I) are the sixth leading cause of death in the United States (1), and persons aged greater than or equal to 65 years and persons with chronic conditions (e.g., lung or heart disease, diabetes, or cancer) are at greatest risk for P&I. During major epidemics, hospitalization rates for persons at highest risk may increase twofold to fivefold (2). However, only 30% of persons aged greater than or equal to 65 years responding to CDC's National Health Interview Survey for 1989 reported having received the influenza vaccine during the previous year (3). In 1988, the Health Care Financing Administration (HCFA) and CDC began a congressionally mandated 4-year demonstration project to evaluate the cost-effectiveness to Medicare of providing influenza vaccine to Medicare beneficiaries. This report presents final results of the Medicare Influenza Vaccine Demonstration conducted during 1988- 1992.

Using intervention and comparison areas in Arizona, Illinois, Massachusetts, Michigan, New York, North Carolina, Ohio, Pennsylvania, and Texas and the entire state of Oklahoma (total Medicare population: approximately 2 million), the demonstration sought to 1) increase the provision of annual influenza vaccination among Medicare beneficiaries and 2) measure the accrued benefits of vaccination in terms of reduced morbidity and mortality and the difference in the cost to Medicare of health services use. Levels of vaccination coverage were assessed at baseline and annually at all sites. The cost-effectiveness indices were calculated using morbidity and mortality data from the demonstration and published studies and compared with cost-effectiveness of other Medicare benefits.

In intervention areas, influenza vaccine was supplied without cost to Medicare providers by local health departments using computerized vaccine monitoring and distribution systems. Providers were reimbursed for administration of vaccine. Before the 1990-91 and 1991-92 influenza seasons, the HCFA sent letters to all Medicare beneficiaries living in the intervention areas urging them to be vaccinated. The letters contained specific program information and a local telephone number for obtaining information. In addition, intervention sites undertook varied activities directed to both providers and patients to promote and distribute vaccine to Medicare beneficiaries (4).

Vaccination Coverage

The number of doses of vaccine administered during the 4-year demonstration and the percentage of the Medicare population vaccinated in the intervention areas increased from 477,316 (26%) during 1989-90 (the first full year of the project) to 995,884 (51%) during 1991-92. Because some Medicare beneficiaries received influenza vaccines from sources not reimbursed by Medicare, annual surveys were conducted to accurately estimate vaccine coverage in each intervention and comparison site. For 1991-92, the overall vaccine coverage estimate for the 10 intervention sites was 59%, compared with 46% overall vaccine coverage in the comparison sites with no enhanced vaccine delivery or promotion activities. Four intervention sites exceeded 60% vaccination coverage. The increase in influenza vaccination coverage in comparison sites was approximately the same as that in the rest of the United States during this period (CDC, unpublished data, 1993).

Vaccine Effectiveness

Three case-control studies of influenza vaccine effectiveness in preventing hospitalization for pneumonia were conducted during the demonstration. In aggregate, these studies estimated that influenza vaccine was 31%-45% effective in preventing hospitalization for any pneumonia during the 1989-90, 1990-91, and 1991-92 influenza seasons (5-7; HCFA, unpublished data, 1993). Cost-Effectiveness

Simulation models were used to calculate Medicare hospital payment savings by incorporating a range of vaccination rates (from 35% to 60% or an increase from the 30% baseline rate of 5%-30%) and a range of influenza vaccine effectiveness estimates in reducing pneumonia hospitalizations and deaths (from 5% to 70%). Total net costs to Medicare were calculated by subtracting savings in hospital payments from vaccine program costs (i.e., vaccine purchase, distribution, and administration). A severe influenza season was defined as one with P&I morbidity and mortality sub- stantially above expected thresholds; a mild season was defined as one in which P&I morbidity and mortality did not exceed expected thresholds. Hospital payment costs were averaged over 10 years by weighting estimates of single-year savings for severe and mild years. At a 40% vaccination rate and vaccine effectiveness rates of 40% and 20% in severe and mild years, respectively, Medicare coverage of the vaccine would increase net Medicare expenditures per beneficiary by an estimated 11 cents or approximately $3.4 million (Table 1). At a vaccination rate of 40% and vaccine effectiveness rates of 42% and 21%, an influenza vaccine benefit would incur zero net costs. At higher levels of vaccine effectiveness and/or vaccine coverage, an influenza vaccine benefit would generate savings for Medicare.

Estimated net costs per year of life gained by a Medicare influenza vaccine benefit compared favorably with other preventive services now covered by Medicare. Assuming the vaccine is 40% effective both for reducing hospitalization and for averting deaths and the vaccination rate among Medicare beneficiaries is 40%, influenza vaccine would cost $145 per year of life gained, substantially below the cost of other preventive interventions. The Office of Technology Assessment estimated that pneumococcal vaccine would cost at least $1853 per year of healthy life gained (a slightly different measure of added years of life that adjusts for disability days) (8). The estimated cost of a year of life gained through cervical cancer screening is $1600-$2900 (9).

Because of these generally favorable results, influenza vaccine was made a covered benefit for all Medicare part B beneficiaries on May 1, 1993.

Reported by

R Schmitz, PhD, D Kidder, PhD, A Schwartz, P Cook, MPH, Abt Associates Inc, Cambridge, Massachusetts. Office of Research and Demonstrations, Health Care Financing Administration. National Immunization Program, CDC.

Editorial Note

The Medicare Influenza Vaccine Demonstration increased annual influenza vaccine coverage and measured both health and economic benefits of influenza vaccine for Medicare. The perspective of the payer used in this study was important in securing coverage for this benefit; however, it differs from cost-effectiveness studies of prevention strategies that usually use a societal perspective and include all direct costs, not just those of the payer. In this study, only the costs paid by Medicare were included. Other costs, such as those incurred by patients for travel or by providers for patient's visits or vaccine administration above the amount paid by Medicare, were not included.

In the last year of the demonstration, influenza vaccination levels exceeded the national health objective for the year 2000 of 60% vaccine coverage among noninstitutionalized persons aged greater than or equal to 65 years (objective 20.11) (10) in four of 10 intervention sites and overall vaccination levels in the demonstration (59%) nearly reached this objective. Vaccination rates were well beyond the rate of 40% shown to incur zero net costs in the cost-effectiveness analysis and would generate savings for Medicare if achieved nationally.

The demonstration's success in vaccine delivery resulted from focused interventions to overcome common barriers to adult vaccination, including the absence of a comprehensive vaccine delivery system, limited reimbursement mechanisms, and lack of vaccination programs where adults congregate. No statutory requirements mandating vaccination of Medicare beneficiaries were necessary to implement this program (4). The results of the cost-effectiveness analysis varied because of the variability of influenza from season to season in causing disease outcomes and the difficulty of attributing these outcomes to influenza. Nonetheless, provision of influenza vaccine was cost-effective for Medicare and may be cost-saving, depending on the effectiveness of the vaccine and the level of vaccination coverage.

Health-care providers such as physicians, hospitals, skilled-nursing facilities, home health agencies, and public health departments can now bill Medicare for reimbursement for the cost of influenza vaccine and the cost of its administration. The procedure codes for billing are 90724 and Q0124, respectively. Additional information for health-care providers in each state is available from the state's Medicare intermediary or carrier.

Implementation of this benefit should substantially improve influenza vaccine coverage among all Medicare beneficiaries, and thus reduce the high levels of morbidity and mortality attributed to influenza. However, both the public and health-care providers need to be educated about the major health burden of influenza-related illness and the necessity of vaccination to prevent it.


1. ACIP. Prevention and control of influenza -- part I, vaccines: recommendations of the Advisory Committee on Immunization Practices (ACIP). MMWR 1993;42(no. RR-6):1-2.

2. CDC. Mortality patterns -- United States, 1989. MMWR 1992;41:121-5.

3. Rodgers DV, Strikas RA, Martinez BA, et al. Influenza vaccination among adults: results of the 1989 National Health Interview Survey {Abstract}. In: Program and abstracts of the Epidemic Intelligence Service 41st annual conference. Atlanta: US Department of Health and Human Services, Public Health Service, CDC, 1992:33-4.

4. CDC. Medicare influenza vaccine demonstration -- selected states, 1988-1992. MMWR 1992;41:152-5.

5. Foster DA, Talsma A, Furumoto-Dawson A, et al. Influenza vaccine effectiveness in preventing hospitalization for pneumonia in the elderly. Am J Epidemiol 1992;136:296-307.

6. Strikas R, Cook P, Kuller L, et al. Case control study in Ohio and Pennsylvania on prevention of hospitalization by influenza vaccination. In: Hannoun C, Kendal AP, Klenk HD, Ruben FL, eds. Options for the control of influenza II. Amsterdam: Elsevier, 1993:153-60.

7. Barker W, Raubertas R, Menegus M, O'Brien D, Freundlich C, Betts R. Case control study of influenza vaccine effectiveness in preventing pneumonia hospitalization among older persons, Monroe County, NY, 1989-92. In: Hannoun C, Kendal AP, Klenk HD, Ruben FL, eds. Options for the control of influenza II. Amsterdam: Elsevier, 1993:143-51.

8. Sisk JE, Riegelman RK. Cost effectiveness of vaccination against pneumococcal pneumonia: an update. Ann Intern Med 1986;104:79-86.

9. Mandelblatt J, Fahs MC. The cost-effectiveness of cervical cancer screening for low-income elderly women. JAMA 1988;259:2409-13.

10. Public Health Service. Healthy people 2000: national health promotion and disease prevention objectives. Washington, DC: US Department of Health and Human Services, Public Health Service, 1991:122; DHHS publication no.(PHS)91-50213.


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Table 1

TABLE 1. Cost to Medicare of influenza vaccine delivery and savings to Medicare, based
on severe and mild influenza seasons* -- Medicare Influenza Vaccine Demonstration,
                                 |                        Basis for calculating
                     Cost per    |                       savings per beneficiary
Category             beneficiary | Category            Severe season     Mild season
Vaccine                 $0.80    | Cost per P&I+
Administration and               | admission             $5308.00         $5308.00
claims processing        1.15    | No. P&I admissions        0.016            0.015
Distribution             0.28    | Effectiveness            40%              20%
Outreach                 0.20    | Vaccination rate
Adverse medical                  |  above baseline          10%              10%
outcomes                <0.01    | Probability of
Total                   $2.43    |  severe/mild
                                 |  season                  40%              60%
                                 | Total savings in
                                 |  hospital payments
                                 |  (10-year annual average)& $1.37         $0.95
                                 | Total savings
                                 |   per beneficiary**               $2.32
*A severe influenza season was defined as one with pneumonia and influenza (P&I) morbidity
 and mortality substantially above expected thresholds; a mild season was defined as one in
 which P&I morbidity and mortality did not exceed expected thresholds.
+Pneumonia and influenza.
&Savings are calculated as the product of the cost per P&I admission, the number of P&I
 admissions per beneficiary, the effectiveness of the vaccine, the vaccination rate above base-
 line, and the probability of a severe or mild season.
**Sum of savings based on probability of a mild or severe season.

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