Medical Spending and the Health of the Elderly

Past research on Medicare spending found wide variations by geographic area but little relationship between spending and health outcomes for the elderly (over age 64).

These researchers from George Mason University and the Urban Institute used data of 17,438 elderly who entered the Medicare Current Beneficiary Survey in the fall of each year from 1991 to 1999, and conducted multiple interviews over three years.

For baseline health the researchers used the first year that the individual entered the study. Medical spending information was collected from three years of claims and self-reports of other spending. Final health status was from the end of each person’s third year in the survey. To determine this they used measures of perceived health (self-reported as excellent, very good, good, fair or poor) and activity limitations (ability to walk several blocks, do housework, dress and bathe, get in and out of chairs and beds, and feed oneself).

The average total medical spending for the three years of observation was $27,092, per person with total Medicare spending $16,293 (40% lower). The researchers found that a 10 percent higher level of medical spending was associated with a 1.9 percent increase in a person’s health score and a 1.5 percent greater survival probability.