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Aging Baby Boomers Play Limited Role in Rising Health Care Cost Trends

Medical Technology and Retreat from Tightly Managed Care More Important Cost Drivers

News Releases
Sept. 25, 2002

FURTHER INFORMATION, CONTACT:
Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.—Contrary to popular belief, the aging of the baby boom generation plays a limited role in rapidly rising health care costs for people under age 65, according to a study released today by the Center for Studying Health System Change (HSC).

In 2001, aging of the U.S. population contributed an estimated 0.7 percentage points, or less than 10 percent of the total increase in per capita health spending for people under 65.

"The aging of the population is always a factor in health care costs, but aging is a minor factor not a major cost driver," said Paul B. Ginsburg, co-author of the study and president of HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation.

"Since aging’s impact on costs is limited, policy makers and employers should focus attention on more significant drivers of health care spending, including new medical technology, the retreat from tightly managed care and the nursing shortage," Ginsburg said.

The magnitude of aging’s influence on costs depends on how steeply spending per person increases with age and the pace at which the population ages. Between ages 18 and 64, annual per capita health spending increases by about $74 on average for each additional year in age. But after age 50, spending starts rising more rapidly—about $152 for each additional year in age between 50 and 64, the study found. The average age of Americans younger than 65 is increasing about 0.13 years annually on average.

"Despite widespread belief to the contrary, the U.S. population is not aging quickly enough to make aging a major health care cost driver," said Bradley C. Strunk, an HSC analyst and study coauthor.

Projections through 2010 indicate that aging will continue to play a limited role in rising costs. Beginning in 2011, as the first wave of the estimated 76 million baby boomers turns 65, financing of their care will begin shifting from the employment-based private insurance system to the publicly financed Medicare program. As a result, Medicare spending will begin to rise sharply, but the larger number of people joining the program rather than more spending per person will cause most of the increase.

The study’s findings are detailed in a new HSC Data BulletinAging Plays Limited Role in Health Care Cost Trends. A second HSC Data BulletinTracking Health Care Costs: Hospital Spending Spurs Double-Digit Increase in 2001—also is available.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.

 

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