Beneath the Averages: An Analysis of Medicare and Private Expenditures

This report compares Medicare and private health insurance per capita spending between 1970 and 1997, demonstrating that Medicare has done better or as well as the private sector in controlling the growth in health spending. Using National Health Expenditure accounts data, the analysis reveals the cumulative increase in per capita health care spending was lower for Medicare than the private sector between 1970 and 1997. Medicare most likely maintained its cumulative advantage, due to the success of cost-cutting measures implemented in the 1980's. However, the report suggests that per capita health spending may begin to rise at a faster rate under Medicare than in the private sector because of: (1) the growing role of technology in diagnosing and treating older patients; and (2) the aging of the Medicare population and higher than average Medicare expenditures among the growing, oldest cohort.