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Health Care Costs Throughout Life

By June 3, 2013Commentary

The total of American health spending is the sum of spending for each individual.  And each individual has a spending arc during the course of their live.  The average of all these spending arcs can itself be informative.  A report from the Society of Actuaries using Health Care Cost Institute and Medicare fee-for-service data examines spending at various ages.   (HCCI Report)   As might be expected, spending generally rises during each year of life, particularly once adulthood is reached.  Male costs are lower than female ones up until about age 55, largely due to childbirth and related expenses.  For the Medicare population, costs also rise each year after age 65, although they flatten for males after age 95 and actually decline for females after age 90.  Changing demographics–age and gender–account for only about 7 to 10% of the real per capita growth in health spending.    The health reform law’s limits on age-adjusting of premiums means that younger people will pay more and older ones less, which means that young people will increasingly subsidize the health spending of older ones.  And of course, eliminating a gender rating difference forces males to subsidize female costs.  Raising the age for Medicare eligibility would lower overall spending but increase per capita costs.  For a person who turns 65, their current estimated out-of-pocket health care costs for their expected remaining life of 20 years would be $146,000.  If they lived 25 more years that rises to $220,600.  Medicare can expect to pay about $450,000 for a beneficiary turning 65 with 20 years of remaining life expectancy.  People with chronic diseases or cancer diagnoses have higher expenses at any age than people without, as might be expected.  Now that this basic data set has been created, the effect of various interventions would be interesting to test–looking at cohorts in wellness or disease management programs, looking a people treated in different settings, looking at regional variation.

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