The Rising Cost of Living Longer: Analysis of Medicare Spending by Age for Beneficiaries in Traditional Medicare

Introduction
  1. The population age 80 and older was 11.3 million in 2010 and is projected to grow to 30.9 million in 2050.  The population age 90 and older was 1.9 million in 2010 and is projected to grow to 8.0 million in 2050.  2010 population estimates are from U.S. Census Bureau. Population Division. Vintage 2011: National Tables. Table 1. Annual Estimates of the Resident Population by Sex and Five-Year Age Group for the United States: April 1, 2010 to July 1, 2011 (NC-EST2011-01); 2012 May; https://www.census.gov/popest/data/national/asrh/2011/tables/NC-EST2011-01.xls.    2050 population estimates are from U.S. Census Bureau, Population Division. 2012 National Population Projections: Summary Tables. Projections of the Population by Age and Sex for the United States: 2015 to 2060 (NP2012-T12). Middle series; 2012 Dec; https://www.census.gov/population/projections/files/summary/NP2012-T12.xls.

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  2. Between 2014 and 2050, the Medicare population is projected to grow from 54 to 93 million beneficiaries, and during this time period, net Medicare spending is expected to rise from 3.0% of GDP to 5.5% in 2050; see Congressional Budget Office, "The 2014 Long-Term Budget Outlook," available at http://www.cbo.gov/publication/45471.

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  3. This report is being released along with a companion article in the journal Health Affairs; see Patricia Neuman, Juliette Cubanski, and Anthony Damico, "Medicare Per Capita Spending By Age And Service: New Data Highlights Oldest Beneficiaries," Health Affairs Web First January 2015; in print February 2015.

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  4. For a more detailed description of the methodology used by Medicare to pay private plans, see Medicare Payment Advisory Commission, "Medicare Advantage Program Payment System," October 2013,  http://www.medpac.gov/documents/MedPAC_Payment_Basics_13_MA.pdf.

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  5. Harriet Komisar and Judy Feder, "HarTransforming Care for Medicare Beneficiaries with Chronic Conditions and Long-Term Care Needs: Coordinating Care Across All Services," Georgetown University, October 2011, available at http://www.cahpf.org/docuserfiles/georgetown_trnsfrming_care.pdf.

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  6. Many of these initiatives are being run out of the newly-created Innovation Center within the Centers for Medicare & Medicaid Services (CMS); see "About the CMS Innovation Center," http://innovation.cms.gov/About/index.html.

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  7. Congressional Budget Office, "Dual-Eligible Beneficiaries of Medicare and Medicaid: Characteristics, Health Care Spending, and Evolving Policies," June 2013, available at http://www.cbo.gov/publication/44308.

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  8. Centers for Medicare & Medicaid Services, "Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule, Access to Identifiable Data for the Center for Medicare and Medicaid Innovation Models & Other Revisions to Part B for CY 2015," available at http://www.ofr.gov/OFRUpload/OFRData/2014-26183_PI.pdf.

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  9. Analysis of Medicaid per enrollee spending by age group is available from Centers for Medicare & Medicaid Services, Table 25, Medicaid Per-enrollee Spending by Gender and Age Group, Calendar Years 2002, 2004, 2006, 2008, 2010, available at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/2010GenderandAgeTables.pdf.

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  10. Analysis of out-of-pocket spending by age group is available from Juliette Cubanski, Christina Swoope, Anthony Damico, and Tricia Neuman, "How Much is Enough How Much Is Enough? Out-of-Pocket Spending Among Medicare Beneficiaries: A Chartbook," Kaiser Family Foundation, July 2014, available at https://www.kff.org/health-costs/report/how-much-is-enough-out-of-pocket-spending-among-medicare-beneficiaries-a-chartbook/.

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Section 1: Medicare Per Capita Spending By Age Among Traditional Medicare Beneficiaries Over Age 65, 2011 and Trends, 2000-2011
  1. These estimates have changed little since 2000.  In 2000, beneficiaries ages 80 and over comprised 25 percent of the Medicare population and 33 percent of total Medicare spending; beneficiaries between the ages of 65 and 69 comprised 22 percent of the Medicare population, but just 14 percent of total Medicare spending.

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  2. These findings are generally consistent with data reported by the Congressional Budget Office (CBO) showing Medicare per capita spending for services covered under Parts A and B for beneficiaries enrolled under traditional Medicare rising from $4,500 for 66-year-olds to $8,500 for 75-year-olds and $12,500 for those ages 85 and older; see CBO, "The 2014 Long-Term Budget Outlook," July 2014, available at http://www.cbo.gov/publication/45471.  Unlike CBO, our analysis includes Part D spending.  Our results also are consistent with analysis showing Medicare costs for beneficiaries age 65 and older rise until around age 90, when they start to decline; see Dale Yamamoto, "Health Care Costs—From Birth to Death," Society of Actuaries, June 2013, available at  http://www.healthcostinstitute.org/files/Age-Curve-Study_0.pdf.

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  3. In 2011, 4.8 percent of beneficiaries in traditional Medicare ages 66 and over died during the year; their spending accounted for 17.5 percent of traditional Medicare spending for beneficiaries in this age group.

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  4. For an analysis of Medicare spending in the last year of life, see Steve Calfo, Jonathan Smith, and Mark Zezza, "Last Year of Life Study," Centers for Medicare & Medicaid Services Office of the Actuary, available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/downloads/Last_Year_of_Life.pdf.

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  5. We examined the hypothesis that the decline in per capita spending by age among decedents could be attributed to fewer months of Medicare spending among older than younger decedents; that is, whether lower per capita spending among older than younger decedents could be due to the oldest beneficiaries surviving fewer months than younger beneficiaries.  However, we did not observe such a pattern.  On average, decedents of all ages lived about six months in the year, with virtually no variation across ages that could explain the decline in spending among decedents by age.  Due to data constraints, we were unable to look at spending among decedents in the last 12 months of life.

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  6. For example, among 70-year-olds, average Medicare per capita spending is more than six times greater for beneficiaries who died in 2011 than among beneficiaries who survived ($42,933 versus $6,847); however, just 2 percent of 70-year olds died that year, so the relatively high cost of 70-year-olds who died in 2011 increases the overall average only modestly ($7,566 for 70-year-olds overall versus $6,847 for survivors only, a difference of $719).  In contrast, among 90-year-olds, average Medicare per capita spending was two times greater among beneficiaries who died than survived in 2011 ($26,687 vs. $12,924), but because 13 percent of 90-year-olds died that year, the decedents raised average per capita spending by $1,821 ($14,745 versus $12,924 for survivors).

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Methodology
  1. Available at http://www.bls.gov/data/inflation_calculator.htm.

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