Medical Spending of the US Elderly

Abstract

We use data from the Medicare Current Beneficiary Survey (MCBS) to document the medical spending of Americans aged 65 and older. We find that medical expenses more than double between ages 70 and 90 and that they are very concentrated: the top 10 per cent of all spenders are responsible for 52 per cent of medical spending in a given year. In addition, those currently experiencing either very low or very high medical expenses are likely to find themselves in the same position in the future. We also find that the poor consume more medical goods and services than the rich and have a much larger share of their expenses covered by the government. Overall, the government pays for over 65 per cent of the elderly's medical expenses. Despite this, the expenses that remain after government transfers are even more concentrated among a small group of people. Thus, government health insurance, while potentially very valuable, is far from complete. Finally, while medical expenses before death can be large, on average they constitute only a small fraction of total spending, both in the aggregate and over the life cycle. Hence, medical expenses before death do not appear to be an important driver of the high and increasing medical spending found in the US.

Keywords: H51; I13; I14; concentration of medical spending; end‐of‐life medical spending; persistence of medical spending.

Figure 1

Personal health care expenditures for the whole population: per person (2014 dollars, left‐hand scale) and as a percentage of GDP (right‐hand scale)

Figure 2

CDFs of medical expenditures, averaged over one, two and three years

Figure 3

Average total medical expenditures over the life cycle

Figure 4

Spending in the last 12 months of life