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The Concentration of Medical Spending: An Update

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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.

Suggested Citation

  • David M. Cutler & Ellen Meara, 1999. "The Concentration of Medical Spending: An Update," NBER Working Papers 7279, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7279
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    1. Mark Pauly, 1980. "Doctors and Their Workshops: Economic Models of Physician Behavior," NBER Books, National Bureau of Economic Research, Inc, number paul80-1, April.
    2. 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.
    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.
    4. 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.
    5. Mark McClellan, 1997. "Hospital Reimbursement Incentives: An Empirical Analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 91-128, March.
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    Cited by:

    1. Cassio M. Turra & Olivia S. Mitchell, 2004. "The Impact of Health Status and Out-of-Pocket Medical Expenditures on Annuity Valuation," Working Papers wp086, University of Michigan, Michigan Retirement Research Center.
    2. Gan, Lydia L. & Frederick, James R., 2010. "The Willingness to Spend on Healthcare: Evidence from Singapore," Review of Applied Economics, Review of Applied Economics, vol. 6(1-2).
    3. Louise Sheiner, 2004. "The effects of technology on the age distribution of health spending: a cross-country perspective," Finance and Economics Discussion Series 2004-14, Board of Governors of the Federal Reserve System (U.S.).
    4. Carlos Bethencourt & Vincenzo Galasso, "undated". "On the Political Complementarity between Health Care and Social Security," Working Papers 184, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. John Sabelhaus & Michael Simpson & Julie Topoleski, 2004. "Incorporating Longevity Effects into Long-Term Medicare Projections: Technical Paper 2004-02," Working Papers 15190, Congressional Budget Office.
    6. Tim Miller, 2001. "Increasing longevity and medicare expenditures," Demography, Springer;Population Association of America (PAA), vol. 38(2), pages 215-226, May.
    7. Ed Westerhout & Frank Pellikaan, 2005. "Can we afford to live longer in better health?," CPB Document 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 Economics and Management, Springer, vol. 12(2), pages 129-143, June.
    9. 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.

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