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Medicare Spending Trends

By January 7, 2020Commentary

Medicare is experiencing a large influx of beneficiaries as baby boomers become eligible, lowering the average age of the total pool of covered persons.  These younger beneficiaries generally have lower health costs, reducing the overall per person spending trends for Medicare.  A Commonwealth Fund report attempts to disentangle the effect of the younger beneficiaries from other factors in Medicare spending trends.   (Comm. Fund Rpt.)   From 2007 to 2015, the number of people covered by traditional Medicare increased 6.8%.  3.3 million beneficiaries from age 65 to 74 joined Medicare in this period, with the number aged 65-69 increasing 29% and the number aged 70 to 74 by 11%.  Many older cohorts actually experienced declines, for example, the number of beneficiaries age 80 to 84 declined 16%.  However, the oldest group, those over 90, increased by 14%.  The percent of all beneficiaries in traditional Medicare aged 65 to 69 rose from 23.8% in 2007 to 28.8% in 2015.  By contrast, beneficiaries aged 75 to 89 were 35.6%  of the population in 2007 but only 30.2% by 2015.  Spending per beneficiary was $8829 in 2007 and actually declined to $8794 in 2015.  If the age distribution of Medicare in 2015 was the same as it was in 2007, that per beneficiary spending would have been $9414 or 7% higher.  Without age adjustment, Medicare spending per person declined by .04% a year in this period, and with the age adjustment the rate was an annualized .8% increase.  Looking at trends by age cohort, there was very minor change across most of them.  Spending levels from 2007 to 2015 among those aged 65 to 69 declined by about 3.7%, were flat for those aged 70 to 74 and grew 10% for people over age 90.  All cohorts had similar trend lines, with spending declining from 2007 to 2012 before a modest uptick in 2013 and beyond.  Decomposing the Medicare population into reason for eligibility, those who qualify because of disability had larger growth in their per person Medicare spending.  The study suggests that while the increase in the proportion of younger beneficiaries in Medicare may have had some minor effect on overall per person spending, all age groups have experienced pretty limited spending growth.

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