The aging of the population exerts upward pressure on federal spending for health care, especially Medicare, as both the number and average age of elderly beneficiaries increase. Total Medicare expenditures may also be affected by changes in relative per-beneficiary spending for beneficiaries of different ages as the population ages. In this paper, we use the Master Beneficiary Summary File to estimate spending per beneficiary for the elderly population (people between ages 65 and 105) enrolled in the traditional fee-for-service (FFS) Medicare program between 1999 and 2012. Over that period, the age for which Medicare spending per beneficiary was highest increased from 89 to 97. In addition, spending per beneficiary grew faster for older beneficiaries than for younger ones in the second half of the period.
Over the entire period, the average annual growth rate of Medicare spending per beneficiary for people ages 65 to 74 was about half of that for those ages 85 to 94. Faster decline in the use of acute inpatient hospital care among younger beneficiaries than among older beneficiaries contributed to the slower growth of spending per beneficiary for the 65- to 74-year-old age group. More rapid growth in spending on care provided in skilled nursing facilities and hospice care—services that are more widely used by older beneficiaries—than in spending on other Medicare services contributed to the faster growth in spending per beneficiary among the older groups; that growth also accounted for the increase in the age for which Medicare spending per beneficiary was highest. Neither increases in life expectancy nor changes in the composition of beneficiaries who were enrolled in the Medicare FFS program can account for those changes in Medicare spending per beneficiary by age.