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

Description of the data.  This analysis is based on data from a random 5 percent sample of Medicare beneficiaries from the Chronic Condition Data Warehouse (CCW) of the Centers for Medicare & Medicaid Services (CMS) from 2000 to 2011.  The CCW includes Medicare administrative enrollment for all Medicare beneficiaries and claims data for beneficiaries enrolled in traditional Medicare; encounter data is not available for beneficiaries enrolled in Medicare Advantage plans.  The CCW also contains all Part D events (prescription drug fill records) from the start of the Part D benefit in 2006, regardless of whether the beneficiary was enrolled in a Medicare Advantage plan or a stand-alone prescription drug plan.  This analysis is based on data from the Cost and Use segment of the CCW, which contains summarized patient-level utilization information, by care setting for the calendar year of the data file.  It also includes Medicare and beneficiary payment information overall and by setting.  The following types of services and settings are included in this file:  hospital outpatient, acute inpatient, non-acute inpatient, skilled nursing facility, hospice, home health, physician office services, ambulatory surgery center, evaluation and management, anesthesia, dialysis, imaging, tests, durable medical equipment, Part B drugs, other Part B procedures, other Part B claims, and Part D drugs.

Sample.  The analysis focuses on beneficiaries over age 65 in traditional Medicare, excluding beneficiaries enrolled in Medicare Advantage and those who are under age 65.  Beneficiaries age 65 were excluded from the analysis of per capita spending because the analysis is based on a comparison of full-year per capita Medicare spending at each age and many beneficiaries age 65 are enrolled in Medicare for less than a full year, depending on their month of enrollment in Medicare; therefore a full year of Medicare spending data is not available for all people at this age.  The number of unweighted cases in 2011 declined from 96,517 66-year-olds (weighted n = 1,930,340) to 245 104-year-olds (weighted n = 4,900).  The analysis excludes spending for beneficiaries enrolled in Medicare Advantage plans because Medicare spending on this population takes the form of a monthly capitation payment to private plans and is not based on actual service utilization.  The analysis excludes spending for beneficiaries under age 65 who qualify for Medicare because of a permanent disability because this analysis is focused on spending patterns by age among older beneficiaries.

Methods.  For this analysis, we calculated Medicare per capita spending for beneficiaries at each year of age overall and by type of service.  Age was determined as of December 31 in each year of the analysis (2000-2011).  If the beneficiary died, the age was determined based on age at the time of death.  We aggregated spending on certain types of services into larger categories.  Spending on Part B providers/services/supplies includes all spending on Part B physician services, other Part B carriers, durable medical equipment, tests, imaging, other procedures, dialysis, anesthesia, evaluation and management, and ambulatory surgery center services.  Spending on hospital inpatient services includes acute inpatient care and other non-acute inpatient services.  When we refer to post-acute care, we are referring to skilled nursing facility and home health services.

To adjust Medicare per capita spending estimates for the years 2000 to 2010 to 2011 dollars, we used the Bureau of Labor Statistics’ Consumer Price Index (CPI) Inflation calculator.1  The CPI inflation calculator uses the average Consumer Price Index for a given calendar year.  These data represent changes in prices of all goods and services purchased for consumption by urban households.

Limitations.  This study describes but does not explain the pattern of Medicare per capita spending by age, and is not designed to assess factors related to the recent slow growth in total and per capita Medicare spending.  Because the 5 percent sample includes Medicare spending but not spending among other payers, this analysis does not examine how Medicaid and other payers’ spending varies by age, in relation to Medicare spending.  The 5 percent sample does not include patient characteristics, such as functional impairment, so the analysis does not control for covariates that could help explain patterns in spending and service use.

Our results reflect patterns of spending among traditional Medicare beneficiaries, but not the total Medicare population.  Because we lack comparable data for the 25 percent of beneficiaries enrolled in Medicare Advantage in 2011, it is not possible to assess whether patterns of service use and spending in traditional Medicare apply to the Medicare population overall.

Section 2: Patterns in Traditional Medicare Per Capita Spending for Selected Medicare-covered Services in 2011 and Trends, 2000-2011 Appendix Tables

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