LONGEVITY AND MEDICARE EXPENDITURES

Background. In the United States, the elderly account for over one thi rd of health care spending. The total population over the age of 65 is projected to increase, as is life expectancy beyond the age of 65. We studied current patterns of Medicare expenses according to age at dea th and the possible effect of future demographic changes on Medicare s pending. Methods. We used data from the Medicare program to estimate l ifetime Medicare expenses for a sample of 129, 166 beneficiaries, 65 o r older, who died in 1989 and 1990, according to age at death. Spendin g for nursing home care not covered by Medicare was excluded. (Nursing home costs represent about 20 percent of total health care spending f or the elderly and increase with age.) Through simulation, we assessed the lifetime payments by Medicare for enrollees who turned 65 in 1990 and those who will do so in 2020. Results. Estimated lifetime Medicar e payments (in 1990 dollars) ranged from $13,044 for persons who died at 65 years of age, to $56,094 for those who died at 80, to $65,633 fo r those who died at 101 or older. The payments associated with an addi tional year of life and the average annual payments over an enrollee's lifetime both decreased as the age at death increased. The estimated 7.9 percent increase in life expectancy beyond 65 years that will have taken place between 1990 and 2020 (19.1 years past the age of 65 in 2 020, as compared with 17.7 years in 1990) was associated with an estim ated increase of 2.0 percent in lifetime Medicare payments. Of the est imated $98 billion increase in total lifetime payments (in 1990 dollar s) from the 1990 group to the 2020 group, 74.3 percent was due to the larger size of the original birth cohort who will reach the age of 65 in 2020, 22.5 percent to an increase in the proportion of that birth c ohort projected to survive to 65 years of age, and 3.2 percent to impr oved life expectancy beyond 65. Conclusions. The effect on Medicare sp ending of increased longevity beyond the age of 65 may not be great. T otal Medicare payments will be more substantially affected by the expe cted increase in the absolute number of elderly people.