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Disability Forecasts and Future Medicare Costs

In: Frontiers in Health Policy Research, Volume 7

  • Jayanta Bhattacharya
  • David M. Cutler
  • Dana P. Goldman
  • Michael D. Hurd
  • Geoffrey F. Joyce
  • Darius N. Lakdawalla
  • Constantijn W. A. Panis

The traditional focus of disability research has been on the elderly, with good reason. Chronic disability is much more prevalent among the elderly, and it has a more direct impact on the demand for medical care. It is also important to understand trends in disability among the young, however, particularly if these trends diverge from those among the elderly. These trends could have serious implications for future health care spending because more disability at younger ages almost certainlytranslates into more disability among tomorrows elderly, and disability is a key predictor of health care spending.Using data from the Medicare Current Beneficiary Survey (MCBS) and the National Health Interview Study (NHIS), we forecast that per-capita Medicare costs will decline for the next fifteen to twenty years, in accordance with recent projections of declining disability among the elderly. By 2020, however, the trend reverses. Per-capita costs begin to rise due to growth in disability among the younger elderly. Total costs may well remain relatively flat until 2010 and then begin to rise because per-capita costs will cease to decline rapidly enough to offset the influx of new elderly people. Overall, cost forecasts for the elderly that incorporate information about disability among todays younger generations yield more pessimistic scenarios than those based solely on elderly data sets, and this information should be incorporated into official Medicare forecasts.

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This chapter was published in:
  • David M. Cutler & Alan M. Garber, 2004. "Frontiers in Health Policy Research, Volume 7," NBER Books, National Bureau of Economic Research, Inc, number cutl04-1, September.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9870.
    Handle: RePEc:nbr:nberch:9870
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    National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.

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    1. Jay Bhattacharya & Alan M. Garber & Thomas MaCurdy, 1996. "Cause-Specific Mortality among Medicare Enrollees," NBER Working Papers 5409, National Bureau of Economic Research, Inc.
    2. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
    3. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
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