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The Concentration of Medical Spending: An Update

In: Themes in the Economics of Aging

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  • David M. Cutler
  • Ellen Meara

Abstract

In the last two decades, Medicare spending has doubled in real terms despite the fact that the health of Medicare beneficiaries improved over this period. The goals of this paper are to document how trends in spending by age have changed among elderly Medicare beneficiaries in the last decade and to reconcile the decline in disability rates with rapid increases in spending among the elderly. First, we conclude that the trend of disproportionate spending growth among the oldest old has continued between 1985 and 1995. Spending among the younger elderly, those 65-69 rose by two percent annually in real per person terms. In contrast, spending for those over age 85 rose by four percent. Second we show that the reasons for the large increase in spending on the oldest elderly relative to the younger elderly is the rapid increase in the use of post-acute services such as home health care and skilled nursing care. Spending on post-acute care for the very old has risen 20 percent per year in the last decade.

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This chapter was published in:

  • David A. Wise, 2001. "Themes in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise01-1.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 10328.

    Handle: RePEc:nbr:nberch:10328

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    1. David M. Cutler & Ellen Meara, 1998. "The Medical Costs of the Young and Old: A Forty-Year Perspective," NBER Chapters, in: Frontiers in the Economics of Aging, pages 215-246 National Bureau of Economic Research, Inc.
    2. David M. Cutler, 1998. "Cost Shifting or Cost Cutting? The Incidence of Reductions in Medicare Payments," NBER Chapters, in: Tax Policy and the Economy, Volume 12, pages 1-28 National Bureau of Economic Research, Inc.
    3. David M. Cutler & Louise Sheiner, 1998. "Demographics and Medical Care Spending: Standard and Non-Standard Effects," NBER Working Papers 6866, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Tim Miller, 2001. "Increasing longevity and medicare expenditures," Demography, Springer, Springer, vol. 38(2), pages 215-226, May.
    2. Gabriel Picone & R. Mark Wilson & Shin-Yi Chou, 2003. "Analysis of hospital length of stay and discharge destination using hazard functions with unmeasured heterogeneity," Health Economics, John Wiley & Sons, Ltd., vol. 12(12), pages 1021-1034.
    3. Carlos Bethencourt & Vincenzo Galasso, . "On the Political Complementarity between Health Care and Social Security," Working Papers 184, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    4. Gan, Lydia L. & Frederick, James R., 2010. "The Willingness to Spend on Healthcare: Evidence from Singapore," Review of Applied Economics, Review of Applied Economics, Review of Applied Economics, vol. 6(1-2).
    5. Louise Sheiner, 2004. "The effects of technology on the age distribution of health spending: a cross-country perspective," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-14, Board of Governors of the Federal Reserve System (U.S.).
    6. John Sabelhaus & Michael Simpson & Julie Topoleski, 2004. "Incorporating Longevity Effects into Long-Term Medicare Projections: Technical Paper 2004-02," Working Papers, Congressional Budget Office 15190, Congressional Budget Office.
    7. Ed Westerhout & Frank Pellikaan, 2005. "Can we afford to live longer in better health?," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 85, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Thomas Bjørner & Søren Arnberg, 2012. "Terminal costs, improved life expectancy and future public health expenditure," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 12(2), pages 129-143, June.
    9. Cassio M. Turra & Olivia S. Mitchell, 2004. "The Impact of Health Status and Out-of-Pocket Medical Expenditures on Annuity Valuation," Working Papers, University of Michigan, Michigan Retirement Research Center wp086, University of Michigan, Michigan Retirement Research Center.

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