The findings of this study reinforce and extend knowledge of age-specific health care costs. The basic distribution of expenditures reported here—high during infancy, low during childhood, and rising thereafter, especially during the senior years—is familiar both from previous research and from common understanding of age-specific health care utilization patterns. Our method of deriving this distribution, however, is novel and offers refined insight into age-specific costs by virtue of its life table analysis of cross-sectional data, used to construct a hypothetical “lifetime.” Unlike most previous research, which has employed longitudinal data, this study's reliance on cross-sectional data permits exclusive focus on the effects of age on health care costs; in this analysis, health care technology and price, and the incidence, severity, and outcomes of disease are held constant. An implication concerning the aging of the population is considered later. As well, the survivor expenditure analysis lends new insight into the implications of aging, highlighting the remarkable concentration of survivors' lifetime costs in their senior years, also noted further later.
By relying on data from Michigan, we cannot claim that our findings are truly representative of the experience of Americans as a whole. We believe that they are an excellent approximation of the national health care cost experience, however. We used BCBSM rather than the nationally representative MEPS data for several reasons, including the unavailability of MEPS at the time this project began. Moreover, when MEPS data became available, we ascertained that the expenditures it covers considerably underestimated national personal health expenditures as estimated by HCFA. Further, the Michigan data permitted us to match mortality data to health care cost data. Note that our resulting estimates of personal health care expenditures closely approximate national estimates produced by HCFA ($4,003 and $4,034, respectively, in 2000 dollars—Health Care Financing Administration 2002
). As well, as we indicate below, our estimate of the lifetime expenditures of senior citizens is virtually identical to that of Spillman and Lubitz (2000)
. Thus, for the purposes of this study, we are confident that any differences between the average American's health care cost experience and that of the average resident of Michigan are not qualitatively important.
Although we were able to estimate the role of females' longevity on their greater lifetime expenditures, our age-specific expenditure data did not come with diagnostic codes. Thus, the data did not permit us to assess the other obvious source of male–female difference: pregnancy and the childbirth process. Presumably, much of the male–female difference in expenditures during the reproductive years is attributable to pregnancy and childbirth. Using different methods, Mustard et al. (1998)
concluded that differences in mortality-related expenditures combined with women's sex-specific health care conditions account for nearly all of the male–female difference.
Further research should investigate the role of serious illness and death in the age distribution of medical expenditures, as well as how these costs play out over the lifetime: are the much larger costs of decedents manifested primarily in acute or chronic care, in hospitalization or nursing home care? Do the answers to these questions vary systematically by age? The nature of these relationships is less clear than is the distribution of health care costs itself. Scitovsky (1988)
argued that both the elderly and persons who die consume a disproportionate share of medical resources. Roos (1987)
found that people dying at older ages have more expensive deaths than people dying at earlier ages, attributing much of the excess to heavy nursing home use by the very elderly. Spillman and Lubitz (2000)
estimated that total expenditures from the age of 65 years until death increase substantially with longevity, from $36,000 for persons who die at the age of 65 to more than $230,000 for those who die at the age of 90, in part because of steep increases in nursing home expenditures for very old persons. (We have inflated Spillman and Lubitz's published estimates, given in 1996 dollars, to year 2000 dollars, using the medical care component of the CPI.)
Nursing home expenditures clearly play an important role in total expenditures on the elderly, as is seen in a study that omitted them. Based on a sample of patients in a medical center, Temkin-Greener et al. (1992)
concluded that decedents' medical care expenditures, excluding nursing home, declined with an increasing age at death. In another study restricted to geriatric patients, Dunlop et al. (1993)
and Chelluri et al. (1993)
demonstrated that severity of illness was more important than age in predicting use of medical resources. Clearly, the complex relationship among care for decedents, age, and overall medical expenditure needs to be better elucidated.
Our finding that the typical American spends more than $300,000 over a lifetime lends perspective on the enormity of our investment in medical services. The lifecycle timing of the bulk of those expenditures gives special pause, in light of the essential demographic phenomenon of our time: the aging of the population. We find that almost 60 percent—$188,658—of the total lifetime cost of survivors is spent after age 65, a figure identical to Spillman and Lubitz's (2000) post-65 estimate of $188,903 (again inflating their figure to year 2000 dollars). Especially striking is our finding that well over one-third of the average 85-year-old's expenditures lies in that person's future.
Given the disproportionate share of medical resources supporting the elderly, analysis of growth in spending by age is crucial in forecasting medical costs as society ages (Lubitz, Beebe, and Baker 1995
). Clearly, it is essential in planning the future of government programs like Medicare and Medicaid. The number of people 65 and older is projected to grow from 13 percent of the population today to 20 percent by the year 2030 (U. S. Census Bureau 2000
). The population of the “old-old” (85+) will quadruple over the next few decades as the large baby boomer cohort reaches these advanced ages (Waite 1996
). Old-age health care costs thus will impose increasingly severe pressure on private finances and government coffers. Indeed, applying our age-specific estimates to the age distribution anticipated for the year 2030, we find that if nothing is done to alter current patterns of health care, per capita health care expenditures will rise by one-fifth due to population aging alone (calculations not shown; available from authors upon request).
A series of social and public policy changes must begin soon to meet this challenge (Knickman and Snell 2002
). Hardly a novel conclusion; the extent of the challenge and the need to plan for it are thrown into stark relief by the findings reported here.