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Health Care Spending on the Elderly

By September 4, 2014Commentary

Health spending by persons over the age of 65 is a large component of all health spending in the United States.  An Agency for Healthcare Research & Quality Statistical Brief, based on Medial Expenditure Panel survey data, looks at trends in such spending from 2001, 2006 and 2011.  (AHRQ Brief)   The number of persons in this population segment grew from 35.8 million in 2001 to 43.6 million in 2011, or about 22%.   Total spending was $414.3 billion in 2011, up from an inflation-adjusted $304 billion in 2001. The average annual expense went from $8,815 in 2001 to $9,863 in 2011, which was actually down slightly from 2006’s $9,971.  Two demographic factors are pushing average spending in different directions.  One is that there are a large number of “younger” elderly coming into the segment, who are generally healthier and have lower spending.  The other is that people are living longer and the older they get, the more health spending is associated with them.  Over 95% of the elderly had some health care expense in each of the three years.  As might be expected, Medicare paid for a significant share of this spending, 62% in 2011, compared to 54.7% in 2001.  This is largely due to Medicare benefit expansions, in particular Part D.  Out-of-pocket spending declined from 18.1% in 2001 to 12.3% in 2011, so that the elderly actually saw an average decline in the inflation-adjusted out-of-pocket dollars spend on health care.  The balance was likely picked up by Medicaid for dual eligibles, and Medicare supplement or Medicare Advantage insurers.

The median expense in 2011 was $4206, with the 25th percentile being $1478 and the 75th $10,289.  As with general health spending, a small number of the elderly account for a large percent of the spending.  In general, there is less use of inpatient care and more of outpatient services and prescription medications.  The portion of total spending due to inpatient hospital care declined to 33.6% in 2011 from 42.7% in 2001.  Ambulatory care spending rose from 25.6% of all spending in 2001 to 30.7% in 2011.  Drug costs went from 18.2% in 2001 to 21.5% in 2011.  Over 90% of the elderly had some outpatient care and some drug use in 2011, with the percent relatively stable from 2001.  Meanwhile hospital inpatient and emergency room use decreased a fair amount and hospital outpatient visits declined slightly.  Average costs for services, in inflation-adjusted dollars increased for all services, for example, the average charge for a physician visit went from $157 in 2001 to $228 in 2011 and the average cost of a hospital day rose from $2408 to $3199 in this time period.  Overall, the report pictures steady growth in health spending for the elderly, but the proportion of those costs that they are bearing is dropping.

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