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

Section 2: Patterns in Traditional Medicare Per Capita Spending for Selected Medicare-covered Services in 2011 and Trends, 2000-2011

• Medicare per capita spending for various Medicare-covered services peaked at different ages in 2011.  For example, Medicare per capita spending for inpatient care peaked at age 89, while per capita spending for both Part B providers/services/supplies and hospital outpatient services peaked at age 83.  For skilled nursing facility, home health, and hospice services, spending reached its highest level among the oldest old beneficiaries: ages 98, 96, and 104, respectively.  (Exhibit 2.1)
  • The relatively high per capita spending among beneficiaries in their mid-to late-90s in 2011 is influenced by skilled nursing facility (SNF), hospice, and (to a lesser extent) home health spending; excluding spending on these services, overall per capita spending peaks at age 89.

• The amount of average Medicare per capita spending on most types of services generally rises and then falls with age, with the exception of hospice spending, which peaks among the oldest beneficiaries, and Part D prescription drug spending which is roughly similar among beneficiaries at different ages. (Exhibit 2.2)  For example, in 2011:
  • Medicare per capita spending for inpatient hospital care increased more than 2.5 times from a low of $1,848 among 66-year-olds to a high of $4,799 among 89-year-olds, and then decreased somewhat to $4,432 for 95-year-olds and $4,122 for 100-year-olds. While inpatient spending peaked at age 89 in 2011, spending on inpatient care was relatively similar for beneficiaries between the ages of 84 and 97 (plateauing at around $4,500).
  • Medicare per capita spending for Part B providers, services, and supplies roughly doubled from $1,368 at age 66 to a high of $2,670 at age 83, before declining.

• Despite a gradual reduction in Medicare per capita spending for Part B providers, services, and supplies for beneficiaries beginning in their mid to late 80s, per capita spending continues to climb into the mid-90s due to persistent levels of inpatient hospital spending and a sharp rise in skilled nursing facility and hospice spending in the late 80s and 90s.
  • Between ages 86 and 96, Medicare per capita spending on skilled nursing facility services increased by more 50 percent (from $2,043 to $3,149) while per capita spending on hospice tripled (from $706 to $2,299).
  • The increase in Medicare per capita spending on skilled nursing facility, home health, and hospice services at older ages is attributable to both a larger share of older beneficiaries using these services compared to younger beneficiaries and higher per capita costs for older users of these services compared to younger users.

• The distribution of Medicare per capita spending on different types of Medicare-covered service varied by age in 2011. (Exhibit 2.3)
  • Inpatient hospital spending was the largest component of total Medicare per capita spending for beneficiaries at all ages over age 65 in 2011, except for centenarians, for whom hospice spending comprised the largest share of total per capita spending.
  • Between the ages of 70 and 95, Medicare spending on Part B providers/services/supplies declined as a share of total per capita spending from 27 percent to 15 percent, while spending on skilled nursing facility services quadrupled as a share of total per capita spending, rising from 5 percent at age 70 to 20 percent at age 95. Between ages 70 and 95, spending on home health services doubled as a share of total per capita spending, from 4 percent to 9 percent, and spending on hospice services increased from 1 percent of total per capita spending at age 70 to 13 percent at age 95.

• Between 2000 and 2011, Medicare per capita spending increased with age, both overall and by type of service. For example:
  • In both 2000 and 2011, Medicare per capita spending for inpatient hospital care increased with age, peaking for beneficiaries in their late 80s and early 90s. The per capita spending increase between 2000 and 2011 for inpatient care was relatively modest for most beneficiaries over age 65 compared to the increase in per capita spending for other types of services, except for the centenarians who account for a very small share of the population (~200,000 beneficiaries).  (Exhibit 2.4)
  • The spending pattern for Medicare per capita spending for Part B providers, services, and supplies in 2011 is similar to what it was in 2000—increasing with age and peaking for beneficiaries in their early 80s. Medicare per capita spending on Part B providers, services, and supplies was about 30 percent higher in 2011 than in 2000 for beneficiaries at all ages, after adjusting for inflation. (Exhibit 2.5)
  • Medicare per capita spending on hospital outpatient services more than doubled at all ages between 2000 and 2011, after controlling for inflation. In both 2000 and 2011, Medicare per capita spending on hospital outpatient services peaked for beneficiaries in their late 70s and early 80s, but was considerably higher at all ages in 2011 than in 2000.  (Exhibit 2.6)
  • In 2011, Medicare per capita spending on skilled nursing facility, home health, and hospice services increased at older ages, and the increase in per capita spending on these services by age was somewhat steeper in 2011 than in 2000. For example, in 2011, between ages 85 and 95, Medicare per capita spending increased from $1,832 to $3,088 for skilled nursing facility services, from $969 to $1,415 for home health services, and from $588 to $2,063 for hospice care.  After controlling for inflation, Medicare per capita spending on skilled nursing facility services for 95-year-olds was about two times greater in 2011 than in 2000 ($3,088 versus $1,576), about two times greater for home health services ($1,415 versus $721), and nearly five times greater for hospice care in 2011 than in 2000 ($2,063 versus $414).  (Exhibit 2.7) (Exhibit 2.8) (Exhibit 2.9)
  • In both 2000 and 2011, Medicare per capita spending for Part B drugs reached its peak for beneficiaries in their late 70s and early 80s, before declining. Per capita spending on Part B drugs was 50 percent higher or more at all ages in 2011 than in 2000, after controlling for inflation. (Exhibit 2.10)
  • In contrast to other services where Medicare per capita spending in 2011 increased fairly steadily with age, Medicare per capita spending on prescription drugs covered under Part D was relatively constant across different years of age, but dropped off sharply for beneficiaries beginning at around age 100. (Trend data for 2000 is not available because the Part D benefit started in 2006.)  (Exhibit 2.11)

• The decline in Medicare per capita spending by age among beneficiaries who died during 2011 is largely attributable to a decline in inpatient spending. For example, Medicare per capita spending on inpatient services among beneficiaries who died in 2011 was $24,508 for 70-year-olds but $11,446 among 9o-year-olds.  Among beneficiaries over age 65 who died in 2011, Medicare per capita spending for hospice care increased gradually with age, and accounted for a larger share of Medicare per capita spending at older ages; per capita hospice spending was $2,252 for decedents age 70 and $3,821 for decedents age 90.  (Exhibit 2.12) (Exhibit 2.13)