The Rising Burden of Health Spending on Seniors
Thursday, February 01, 2007
by Liqun Liu, Andrew J. Rettenmaier and Zijun Wang
Table of Contents
Health Status of the Elderly
“Health status declines with age.”
One reason health costs are projected to rise is because Americans are living longer and will spend longer periods of their lives in retirement. While the soon-to-retire baby boomers are healthier and wealthier than previous generations, their physical and cognitive abilities will still decline as they age. This will, in turn, lead to an increase in medical care utilization.
Health Status Declines with Age. Self-reported health status is a common indicator of physical well-being. Figure IV shows how three groups of seniors - ages 65 to 74, ages 75 to 84, and age 85-plus - rank their own health status: 14
- Within each age group, 30 percent or more say they are in good health.
- Among the younger seniors, 47 percent report excellent or very good health, versus only 36 percent of the oldest retirees.
- In contrast, 33 percent of the oldest seniors identify their health as fair to poor, versus only 23 percent of the younger group.
“The oldest seniors have more physical limitations, on the average.”
Another way to measure the age-related decline in health is the ability to perform daily activities. Two ways to measure this include "Instrumental Activities in Daily Living" and "Limitations in Activities in Daily Living," which are both reported by the Centers for Medicare and Medicaid Services. [See Figure V.] Instrumental activities in daily living are those considered necessary for independent living, and include managing money, shopping, performing housework and the like. Persons who have difficulty performing or are unable to perform these activities are categorized as having a limitation; the percentage of individuals with instrumental limitations rises from 11 percent of younger seniors to 16 percent for the oldest. Limitations in activities in daily living - including dressing oneself, eating, bathing and so forth - also rise with age; those with one or two of these limitations rises from 15 percent of younger seniors to 27 percent of the oldest.
The notion that retirees' health status declines with age is supported by other measures as well, including upper extremity limitations, mobility limitations, the increased prevalence of chronic conditions, and the deterioration of hearing and eyesight.
“Seniors are healthier and have longer life expectancies than previous generations.”
Quality of Life at Any Given Age Is Increasing over Time. While it is true that individuals are living longer, eventually their physical and mental abilities will deteriorate along with their earning potential. But over time the quality of life at any given age has improved. In a paper published in the Journal of Political Economy , researchers Kevin M. Murphy and Robert H. Topel find that while quality of life generally decreases with age, it has improved over time for every age group. 15
Similarly, research by David M. Cutler and Elizabeth Richardson suggests quality of life decreases with age because the prevalence of most chronic conditions increases with age. 16 At the same time, however, quality of life has improved over time for those who suffer from most chronic conditions due to advances in medical technology that reduce associated debilitating effects or functional limitations.
Clearly, as the baby boomers age and the incidence of chronic conditions among them increases, demand for health care and medical spending will rise, increasing the strain - not only on their own incomes, but on taxpayers as well.