Medical spending of the U.S. elderly

  • Eric French Eric French
  • Jeremy McCauley Jeremy McCauley
  • John Bailey Jones John Bailey Jones
  • Mariacristina De Nardi Mariacristina De Nardi

We use data from the Medicare Current Bene ciary Survey (MCBS) todocument 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% of all spenders are responsible for 52% 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 moremedical goods and services than the rich and have a much larger share of their expenses covered by the government. Overall, the government pays for 65% 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 U.S.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.

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