Demographics and medical care spending: standard and non-standard effects
AbstractIn this paper, we examine the effects of likely demographic changes on medical spending for the elderly. Standard forecasts highlight the potential for greater life expectancy to increase costs: medical costs generally increase with age, and greater life expectancy means that more of the elderly will be in the older age groups. Two factors work in the other direction, however. First, increases in life expectancy mean that a smaller share of the elderly will be in the last year of life, when medical costs generally are very high. Furthermore, more of the elderly will be dying at older ages, and end-of-life costs typically decline with age at death. Second, disability rates among the surviving population have been declining in recent years by 0.5 to 1.5 percent annually. Reductions in disability, if sustained, will also reduce medical spending. Thus, changes in disability and mortality should, on net, reduce average medical spending on the elderly. However, these effects are not as large as the projected increase in medical spending stemming from increases in overall medical costs. Technological change in medicine at anywhere near its historic rate would still result in a substantial public sector burden for medical costs.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 1999-20.
Date of creation: 1999
Date of revision:
Other versions of this item:
- 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.
- NEP-ALL-1999-06-08 (All new papers)
- NEP-HEA-1999-06-08 (Health Economics)
- NEP-IAS-1999-06-08 (Insurance Economics)
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