Cost of Care to Elderly Soars

During the decade following 1996, the average annual cost of health care for those 65 and older increased 30%, according to a recent analysis.¹ Medicare footed a larger percentage of the bill for the elderly, fueled in part by the implementation of Part D in 2006.

The data sources were the Medical Expenditure Panel Survey Household Component (MEPS-HC) and Medical Provider Component (MEPS-MPC). MEPS-HC is a nationally representative longitudinal survey that collects information on health care utilization, status, and expenditures, and MEPS-MPC collects information on visit dates, diagnoses, procedures, charges, and payments from a sample of providers. To account for inflation, estimates for 1996 were adjusted to 2006 dollars.

The $333.3 billion in total expenses for the elderly in 2006 was more than $100 billion higher than inflation-adjusted expenses for 1996 (Table 1). Although the elderly population increased from 34.1 million to 38 million, the average annual expense per person also increased to $9,080 from $6,989.

The median per-person expense was $4,032 ($1,752 at the 25th percentile and $9,289 at the 75th percentile); for 1996, these figures were $2,204, $834, and $6,115. Expenditures were not broken out by specialty, but were segmented by service type/site and payment source.

Medicare picked up a larger portion of the bill (see figure) than in 1996 (60.9% versus 56.6%), and private insurers paid a smaller percentage (14.1% versus 18.8%). The Part D drug benefit contributed to a dramatic increase in the portion that Medicare paid for prescribed medicines (nearly 50% versus 4%). Out-of-pocket costs paid by the elderly dropped from half to one-third, and the percentage paid by private insurance nosedived from 31% to 12%.

There were no significant changes in the services provided between 1996 and 2006, with the exception of a much higher percentage of emergency-department visits in 2006 (20% versus 13.2%). There was a slight decline in inpatient services (37.2% versus 43.2%), and somewhat larger shifts in the payment percentages for prescribed medicines (22% versus 12.7%) and home health care expenses (6.6% versus 14.9%).

The average expenditure per prescription was significantly higher in 2006 ($175 versus $105), as was the average cost of an office visit ($180 versus $114, Table 2). Dental-visit spending rose from $187 to $254, while inpatient days ($2,714 versus $2,271) and emergency-department visits ($651 versus $512) experienced more modest increases.

1. Machlis SR. Trends in Health Care Expenditures for the Elderly Age 65 and Over: 2006 versus 1996. Rockville, MD: Agency for Healthcare Research and Quality; 2009.