NCPA - National Center for Policy Analysis

Dramatic Rise In Health Costs For Oldest Seniors

January 26, 2000

People who have reached their 80s and beyond are supposed to be living with fewer diseases and disabilities these days than previous generations, a number of studies have shown. Yet Medicare spending per beneficiary among the eldest has doubled in real terms during the past two decades.

Harvard University researchers David M. Cutler and Ellen Meara looked into the huge, seemingly paradoxical rise in outlays.

Here are some of their findings:

  • From 1985 to 1995, real per capita outlays for those over age 85 rose by 53 percent -- compared with 22 percent for those age 65 to 69.
  • In prior decades, surging medical spending on the oldest old reflected the growing intensity of acute care services -- such as inpatient hospital care -- they received.
  • But since 1985, surging costs have mainly reflected greater use of post-acute care services.
  • Between 1985 and 1995, average outlays for post-acute care services -- such as skilled nursing, home health care, and rehabilitation facilities -- for people over age 85 exploded from $240 per person to nearly $2,000.

Some of this can be explained by the easing of government rules on post-acute services during the period. But the study's authors raise the troubling possibility of growing outright fraud among home health-care providers -- whose services are poorly monitored and who now account for 13 percent of Medicare spending.

Source: Gene Koretz, "Medical Costs of the 'Old Old,'" Business Week, January 31, 2000.


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