Cost of Care to Elderly Soars

by Staff Writer on December 01, 2009

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.