The Rising Cost of Living Longer: Analysis of Medicare Spending by Age for Beneficiaries in Traditional Medicare

Section 1: Medicare Per Capita Spending By Age Among Traditional Medicare Beneficiaries Over Age 65, 2011 and Trends, 2000-2011

• Between 2010 and 2050, the population ages 65 and older will double, from about 40 million to 84 million people. The number of octogenarians (people ages 80 and older) will nearly triple over these years from about 11 million to about 31 million, while the number of nonagenarians and centenarians (those in their 90s and 100s) is projected to quadruple from 2 million to 8 million by 2050.  (Exhibit 1.1)
• Medicare’s octogenarians, nonagenarians, and centenarians account for a disproportionate share of Medicare spending. In 2011, beneficiaries ages 80 and older comprised 24 percent of the Medicare population but 33 percent of total Medicare spending.  In contrast, beneficiaries between the ages of 65 and 69 comprised 26 percent of the Medicare population, but just 15 percent of total Medicare spending.¹  (Exhibit 1.2)
• Among Medicare beneficiaries over age 65, Medicare per capita spending rises gradually with age and peaks at age 96, before declining. In 2011, average per capita Medicare spending nearly tripled between age 66 ($5,562) and age 96 ($16,145), and then fell gradually for the relatively small number of seniors who lived to older ages.²  (Exhibit 1.3)
• Medicare per capita spending rises with age, even when the analysis excludes all beneficiaries who died during the year. Medicare per capita spending among Medicare beneficiaries over age 65 who survived the full year in 2011 (excluding decedents) also rises with age and peaks at age 96 ($14,278).  (Exhibit 1.4)
• The increase in Medicare per capita spending by age for all Medicare beneficiaries over age 65 is not entirely attributable to end-of-life care nor to higher death rates among older beneficiaries. Medicare per capita spending is considerably higher for people who die during the year than people who survive the entire year ($33,486 versus $8,647 in 2011) and accounts for a disproportionate share of Medicare spending, yet the increase in spending by age is not entirely due to higher spending at the end of life.^3,4  In fact, Medicare spending for beneficiaries who died during the year declined steadily with age in 2011, from a high of about $43,000 among 70-year-old decedents, to about $20,000 among centenarians who died that year.⁵  (Exhibit 1.5)  The decline in Medicare per capita spending by age among beneficiaries who died during 2011 is largely attributable to a decline in inpatient spending (see Section 2, Exhibits 2.12 and 2.13 and Table 2 for details on spending by type of service among decedents).  Yet because of higher death rates among older beneficiaries (rising from 2 percent of 70-year-olds to 13 percent of 90-year-olds and 29 percent of 100-year-olds), average per capita spending among beneficiaries who die at older ages has a greater influence on the estimates of average spending among beneficiaries overall at older ages.⁶
• Between 2000 and 2011, the age at which Medicare per capita spending reached its peak increased from age 92 to age 96. At all ages, Medicare per capita spending was higher in 2011 than in 2000, including adjustments for inflation and the introduction of the Part D prescription drug benefit.  In 2000, Medicare per capita spending peaked at $9,557 (in 2011 dollars) at age 92, while in 2011, Medicare per capita spending peaked at $16,145 (including Part D spending; $15,015 excluding Part D spending) at age 96.  (Exhibit 1.6)
• The difference in Medicare per capita spending between beneficiaries ages 80 and older and younger beneficiaries over age 65 has grown wider over time. For example, in 2011, Medicare per capita spending was 2.5 times greater for 85-year-olds ($13,466) and 3 times greater for 95-year-olds ($15,732) than for 66-year-olds ($5,562).  These ratios have increased since 2000, when Medicare per capita spending was 2.3 times greater both for 85-year-olds ($8,959) and for 95-year-olds ($9,139) than for 66-year-olds ($3,908).  (Exhibit 1.7)
• Medicare per capita spending grew faster for beneficiaries ages 90 and older than for younger beneficiaries over age 65 between 2000 and 2011. When spending on the Part D drug benefit is included beginning in 2006, per capita spending grew at an average annual rate of 5.8 percent for beneficiaries ages 66 to 69 between 2000 and 2011, rising to 7.3 percent among beneficiaries ages 90 and older.  (When Part D spending is excluded, the average annual growth rates are somewhat lower for each age group but the trend by age is similar.)  (Exhibit 1.8)  During this period, Medicare per capita spending for beneficiaries ages 90 and older increased from $8,546 in 2000 (in 2011 dollars) to $14,217 in 2011 (including Part D spending), an increase of 66 percent over these years.  This increase was greater than the 43 percent increase among beneficiaries in their 70s and the 51 percent increase among those in their 80s.
  (Exhibit 1.9)