WSJ:  September 11, 2003:Medicare Study May Cast Doubt On Projections of Soaring Costs

Medicare Study May Cast Doubt On Projections of Soaring Costs

A healthy person reaching the age of 70 spends about the same amount on health care in his remaining years as a sickly person who reaches the same age, according to new research findings that may cast doubt on federal projections of surging Medicare expenditures.

The study, published in the New England Journal of Medicine, attempted to shed light on a debate among health-care economists and policymakers about the implications of longer life expectancies on health-care costs.

Some who have studied the issue have foreseen a rising tide of costs -- and an attendant surge in outlays by the federal Medicare insurance program for the aged -- as the aging baby boomers swell the ranks of the elderly.

1 Remaking Medicare:2  Full coverage of the ongoing Medicare debate, plus commentary and analyses.

According to a projection by the Department of Health and Human Services, rising life expectancies are among the reasons that the trust fund that supports Medicare will be insolvent by 2026.

But the study's authors, a team of researchers at the Centers for Disease Control and Prevention, found that the assumption that longer life leads to higher health-care costs for each elderly person was wrong. In essence, the study found that healthy people at 70 save on annual health-care outlays compared with those who are ill, and that the savings aren't offset by their longer lifespans.

The researchers studied the medical records and payments of 17,000 elderly people between 1992 to 1998. Participants in the study were at least 70 years old.

"Our study shows that current efforts to improve the health of the middle-aged and the younger elderly won't have an adverse financial effect because people will be longer on Medicare," says James Lubitz, a CDC official and the study's lead researcher.

Medicare eligibility begins at 65, and the average American at that age today is expected to live to about 83, up from 80 in 1965, according to U.S. census estimates. Nearly $271 billion was spent on Medicare in 2002, and HHS projects that to rise to $495 billion by 2012.

In an accompanying editorial, David M. Cutler, an economics professor at Harvard University, said that "current Medicare projections, which implicitly assume that longer life costs more," are "substantially overstated." He declined to say by how much.

The researchers said those who reach 70 in healthy condition have a life expectancy of 14.3 years, over which they would run up a total health care bill of $136,000 in 1998 dollars. Septuagenarians suffering from one or more health problems had a life expectancy of 11.6 years and would accumulate expenditures of about $145,000.

Write to Joseph Pereira at joe.pereira@wsj.com³

Updated September 11, 2003