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Medical Spending of the US Elderly

Author

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  • Eric French
  • Elaine Kelly
  • Mariacristina Nardi
  • Eric French
  • John Bailey Jones
  • Jeremy McCauley

Abstract

We use data from the Medicare Current Beneficiary Survey (MCBS) to document the medical spending of Americans aged 65 and older. We find that medical expenses more than double between ages 70 and 90 and that they are very concentrated: the top 10% of all spenders are responsible for 52% of medical spending in a given year. In addition, those currently experiencing either very low or very high medical expenses are likely to find themselves in the same position in the future. We also find that the poor consume more medical goods and services than the rich and have a much larger share of their expenses covered by the government. Overall, the government pays for 65% of the elderly's medical expenses. Despite this, the expenses that remain after government transfers are even more concentrated among a small group of people. Thus, government health insurance, while potentially very valuable, is far from complete. Finally, while medical expenses before death can be large, on average they constitute only a small fraction of total spending, both in the aggregate and over the life cycle. Hence, medical expenses before death do not appear to be an important driver of the high and increasing medical spending found in the U.S.
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Suggested Citation

  • Eric French & Elaine Kelly & Mariacristina Nardi & Eric French & John Bailey Jones & Jeremy McCauley, 2016. "Medical Spending of the US Elderly," Fiscal Studies, Institute for Fiscal Studies, vol. 37, pages 717-747, September.
  • Handle: RePEc:ifs:fistud:v:37:y:2016:i::p:717-747
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    Cited by:

    1. Harry ter Rele & Arjen Hussem & Casper van Ewijk & Albert Wong, 2016. "The ability to pay for long-term care in the Netherlands: a life-cycle perspective," CPB Discussion Paper 321, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Ivan Frankovic & Michael Kuhn & Stefan Wrzaczek, 2020. "On the Anatomy of Medical Progress Within an Overlapping Generations Economy," De Economist, Springer, vol. 168(2), pages 215-257, June.
    3. Schünemann, Johannes & Strulik, Holger & Trimborn, Timo, 2017. "The gender gap in mortality: How much is explained by behavior?," Journal of Health Economics, Elsevier, vol. 54(C), pages 79-90.
    4. John Bailey Jones & Aaron Steelman, 2019. "Lifetime Medical Spending of Retirees," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue May.
    5. Julien Hugonnier & Florian Pelgrin & Pascal St‐Amour, 2020. "Closing down the shop: Optimal health and wealth dynamics near the end of life," Health Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 138-153, February.
    6. Poterba, James M. & Venti, Steven F. & Wise, David A., 2017. "The asset cost of poor health," The Journal of the Economics of Ageing, Elsevier, vol. 9(C), pages 172-184.
    7. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Savings After Retirement: A Survey," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 177-204, October.
    8. Zelalem Yilma & Owen O’Donnell & Anagaw Mebratie & Getnet Alemu & Arjun S. Bedi, 2015. "Subjective Expectations of Medical Expenditures and Insurance in Rural Ethiopia," Tinbergen Institute Discussion Papers 15-120/V, Tinbergen Institute.
    9. Allin, Sara & Farmer, Julie & Quiñonez, Carlos & Peckham, Allie & Marchildon, Gregory & Panteli, Dimitra & Henschke, Cornelia & Fattore, Giovanni & Lamloum, Demetrio & Holden, Alexander C.L. & Rice, T, 2020. "Do health systems cover the mouth? Comparing dental care coverage for older adults in eight jurisdictions," Health Policy, Elsevier, vol. 124(9), pages 998-1007.
    10. Titus J Galama & Hans van Kippersluis, 2019. "A Theory of Socio-economic Disparities in Health over the Life Cycle," The Economic Journal, Royal Economic Society, vol. 129(617), pages 338-374.
    11. Dragone, Davide & Strulik, Holger, 2020. "Negligible senescence: An economic life cycle model for the future," Journal of Economic Behavior & Organization, Elsevier, vol. 171(C), pages 264-285.
    12. Mai Dao & Callum Jones, 2018. "Demographics, Old-Age Transfers and the Current Account," IMF Working Papers 2018/264, International Monetary Fund.
    13. Arjen Hussem & Casper Ewijk & Harry Rele & Albert Wong, 2016. "The Ability to Pay for Long-Term Care in the Netherlands: A Life-cycle Perspective," De Economist, Springer, vol. 164(2), pages 209-234, June.
    14. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, vol. 106(11), pages 3480-3520, November.
    15. Tim Murray, 2018. "Do Potential Future Health Shocks Keep Older Americans from Using Their Housing Equity?," 2018 Papers pmu533, Job Market Papers.
    16. Arjen Hussem & Casper Ewijk & Harry Rele & Albert Wong, 2016. "The Ability to Pay for Long-Term Care in the Netherlands: A Life-cycle Perspective," De Economist, Springer, vol. 164(2), pages 209-234, June.
    17. Ivan Frankovic & Michael Kuhn & Stefan Wrzaczek, 2020. "On the Anatomy of Medical Progress Within an Overlapping Generations Economy," De Economist, Springer, vol. 168(2), pages 215-257, June.

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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