Longer life does not necessarily increase health care costs

A healthy person reaching the age of 70 spends about the same amount on health care in his remaining years as a sickly person who reaches the same age, according to a new study published in the New England Journal of Medicine.

The study's authors found the assumption that longer life leads to higher health care costs for each elderly person was wrong. In essence, they found that healthy people at 70 save on annual health care outlays compared with those who are ill, and that the savings aren't offset by their longer lifespans. Analysing 1992-1998 data from the Medicare Current Beneficiary Survey, they found:

A person with no functional limitation at 70 years of age had a life expectancy of 14.3 years and expected cumulative health care expenditures of about $136,000 (in 1998 dollars)

By contrast, a person with a limitation in at least one activity of daily living had a life expectancy of 11.6 years and expected cumulative expenditures of about $145,000.

Expenditures varied little according to self-reported health at the age of 70.

However, persons who were institutionalised at the age of 70 had cumulative expenditures that were much higher than those for persons who were not institutionalised.

The study may cast doubt on federal projections of surging Medicare expenditures and shed light on a debate among health care economists and policy makers about the implications of longer life expectancies on health care costs.

The average American at that age today is expected to live to about 83, up from 80 in 1965, according to U.S. census estimates.

Source: Joseph Pereira, Medicare Study May Cast Doubt On Projections of Soaring Costs, Wall Street Journal, September 11, 2003; based on James Lubitz, Liming Cai, Ellen Kramarow and Harold Lentzner, Health, Life Expectancy, and Health Care Spending among the Elderly, New England Journal of Medicine, September 11, 2003.

For text (WSJ subscription required)
http://online.wsj.com/article/0,,SB106321927431460900,00.html

For study text
http://content.nejm.org/cgi/content/short/349/11/1048

For more on Economics of Medicare
http://www.ncpa.org/iss/hea/

FMF Policy Bulletins/ 16 September 2003