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Christopher Fleming

Changing Population Age-Mix Affects Health Care Costs Only Modestly, CMS Researchers Say

Per Person Spending For Those Over Age 85 Has Been Increasing Relatively Slowly Because Of Trends In Nursing Home Spending

Bethesda, MD -- The changing age-mix of the U.S. population has had only a modest effect on the growth of health care spending, and that trend is expected to continue even as the nation ages dramatically over the next four decades, experts at the federal government’s Centers for Medicare and Medicaid Services (CMS) report today in a Health Affairs Web Exclusive.

In previous work, CMS researchers had tracked age-related health-spending trends through 1999. The article by statistician Micah Hartman and coauthors published today updates those data through 2004.

Per person personal health care spending for the population age 65 and older was $14,797 in 2004 -- 5.6 times higher than spending per child ($2,650 in 2004) and 3.3 times spending per working-age person ($4,511 in 2004). Consistent with other studies, the authors found that per capita health spending grew faster for those under age 65 than for those age 65 and older, although the difference -- 0.2 percent annually between 1987 and 1999 -- was much less than previously reported.

Among the elderly, the largest decline in spending relative to the nonelderly occurred among those age 85 and older: Spending for this group was 6.9 times higher than spending by the working-age population in 1987, but only 5.7 times higher in 2004. This relative slowdown in per person spending growth among the oldest elderly was almost entirely due to the low 0.7 percent per capita annual growth in nursing home costs, the largest component of health spending for those age 85 and older. The slow growth in nursing home costs comes as payers such as Medicaid have been attempting to move the oldest elderly from nursing facilities to home and community-based settings.

Because the oldest elderly are a relatively small subgroup of the elderly, the slower spending growth for this group has not had a large effect on overall trends in per capita spending for seniors. That could change in the future, though, when those over age 85 make up a greater share of the nation’s population.

In contrast, per person spending trends for children have kept pace with those in the working-age group, in part because of the impact that spending for the State Children’s Health Insurance Program (SCHIP) has had since at least 1999. In 2004, children’s health care was primarily paid for by private sources and Medicaid. Prescription drug spending trends for the working-age population, which included the entire baby-boom generation in 2004, had more impact than they did for all other age groups.

Simulating The Impact Of An Aging Population
On Future Health Costs

To estimate the effects of an aging population on health costs in the future, the researchers simulated what health care spending in 2004 would have been after replacing the 2004 age-mix with the predicted age distributions of future years. “The simulated 2004 estimates reflect just a changing age-mix, while holding constant prices, technology, population growth, and other factors at 2004 levels,” the authors explain.

Between 1987 and 2004, the changing age-mix of the population accounted for only 0.3 percent of annual growth in overall spending and 0.2 percent of annual spending growth in Medicare spending. This impact is similar to that expected through 2050, with modest effects on health care costs, accounting for 0.4 percent of annual growth in overall health spending and 0.1 percent of annual growth in Medicare spending.

“Some might find it surprising that the changing age-mix of the population would not be a bigger driver of Medicare spending growth,” said Hartman. “However, for the next few decades, the bulk of the baby boomers coming onto Medicare are expected to be younger, typically less expensive beneficiaries.”

The more significant impact on Medicare spending is anticipated to come from Medicare enrollment --1.6 percent average annual growth between 2004 and 2050 -- rather than through a change in the age-mix of the Medicare population, according to Hartman and coauthors economist Aaron Catlin, statistician David Lassman, economist Jonathan Cylus, and Stephen Heffler, the director of the National Health Statistics Group at the CMS Office of the Actuary.



Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at


©2007 Project HOPE–The People-to-People Health Foundation, Inc.