NCPA - National Center for Policy Analysis

Aging Baby Boomers and Health Care Inflation

October 4, 2002

With the leading edge of the baby boom generation now in their mid-50s, policy makers increasingly have focused on the relationship between aging and rising health care costs.

However, despite widespread belief to the contrary, aging baby boomers are not a major cause of rapidly rising health care costs for Americans under age 65, according to a new study. In 2001, population aging contributed an estimated 0.7 percentage points, or less than 10 percent of the total increase in per capita health care spending for people under 65 (see Figure).

Health spending increases with age because older people tend to have more medical needs than younger people. Thus, average health spending per person for the population as a whole will rise as the average age of the population increases. The magnitude of aging's influence on costs depends on how steeply spending per person increases with age and the pace at which the population ages.

  • Annual per capita health spending increases by about $74 on average (2001 dollars) for each additional year in age between 18 and 64.
  • Spending starts rising more rapidly after age 50-about $152 for each additional year in age between 50 and 64.
  • The average age of Americans younger than 65 is increasing about 0.13 years annually.

Differences in spending by age are not large enough and the U.S. population is not aging quickly enough to make aging a major cost driver for the under-65 population. For certain categories of health care services, such as cardiovascular services, aging may be a more important factor than it is for all types of services combined.

Source: Bradley C. Strunk and Paul B. Ginsburg, "Aging Plays Limited Role in Health Care Cost Trends," Center for Studying Health System Change, Data Bulletin No. 23, September 2002.

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