Researchers with the U.S. Centers for Medicare and Medicaid Services (CMS), the government agency responsible for managing and monitoring health care spending, have just released a new study of health spending patterns by age groups. The information may not be surprising (health care costs for the elderly are more than three times the costs for working-age individuals, for instance), but the data provide a look at the likely future of health care costs in this country as the baby boom generation ages.

According to the report, there are really three potential contributors to the expected increase in medical costs in the future:

  1. Increased longevity. An individual born in the early 1940s could expect, at the time, to live to about age sixty-four. Now, however, those pre-boomers have reached what was their original life expectancy—and they still have a little more than seventeen years of life expectancy. That is five years more than the life expectancy of someone who had reached sixty-five in 1940—the year the current “young old” cohort was born.

  2. Increasing numbers. Of course the proverbial pig in the python is the baby boomer generation—the first members of which are just beginning to reach their early sixties. This population bubble—coupled with the increased longevity—means that the “elderly” will continue to grow as a portion of the population. But it is important to note that the “young old” segment will grow first (and through about 2020), and that they are likely to be relatively healthier Medicare recipients than their older cousins.

  3. Increasing care needs. The study calculates that the increasing cost of care for elderly individuals has only very slightly outstripped the costs for younger groups over the past two decades. This mildly surprising conclusion comes from subtle but basic changes in the provision of health care for each of the three broad groups studied—from the 1997 adoption of the State Children’s Health Insurance Program (SCHIP) to decreased utilization of hospital services for both the elderly and working-age patients.

Interestingly, the reduction in hospital expenditures roughly corresponded with an increase in home health and nursing home care for the elderly. For working-age patients, the hospital expenditure drop was roughly equivalent to an increase in prescription drug costs over the study period.

So what are the health care costs? For 2004, the study calculates that expenditures for those over age 85 averaged $25,891. For those over 65 the figure was $14,797; for ages 19 through 64 it was $4,511 and for those under age 19 the figure was $2,650 each. The net effect of the changes over the last two decades on relative health care costs? In 1987 the average "old old" (over 85) patient spent 6.9 times as much on health care as a working-age (19-64) patient; in 2004 the ratio was 5.6. The corresponding relationship between 65+ patients and the working-age patient was 3.5 in 1987 and 3.3 in 2004.

One other element of health care costs calculated by the study: total costs for each age group paid from Medicare, Medicaid, private payments, health insurance and other sources. While the study does not extensively analyze trends, the accompanying tables invite further analysis. For example, it appears that average Medicare expenditures for those over age 85 have tripled over the two decades, while Medicaid payments have "only" doubled and out-of-pocket expenditures have increased by a factor of about 1.6. 

Would you like to subscribe to Elder Law Issues? Simply provide your e-mail address and name below, and click "Subscribe". At the same time, you may choose to also subscribe to The Voice, the newsletter of the Special Needs Alliance.

Privacy note: We do not ever use your e-mail address or name for any purpose other than to send out our subscription-based newsletter. You can rest assured that we will not sell, trade or share this information with any other person or entity. We have no ancillary or associated companies or entities to which we could provide your e-mail address, either.

© 1993-2008 Fleming & Curti, P.L.C.
520-622-0400 /  FAX: 520-203-0240