The lifetime distribution of health care costs

To estimate the magnitude and age distribution of lifetime health care expenditures.

Claims data on 3.75 million Blue Cross Blue Shield of Michigan members, and data from the Medicare Current Beneficiary Survey, the Medical Expenditure Panel Survey, the Michigan Mortality Database, and Michigan nursing home patient counts.

Data were aggregated and summarized in year 2000 dollars by service, age, and gender.

We use life table models to simulate a typical lifetime's distribution of expenditures, employing cross-sectional data on age- and sex-specific health care costs and the mortality experience of the population. We determine remaining lifetime expenditures at each age for all initial members of a birth cohort. Separately, we calculate remaining expenditures for survivors at all ages. Using cross-sectional data, the analysis holds disease incidence, medical technology, and health care prices constant, thus permitting an exclusive focus on the role of age in health care costs.

Per capita lifetime expenditure is USD $316,600, a third higher for females (USD $361,200) than males (USD $268,700). Two-fifths of this difference owes to women's longer life expectancy. Nearly one-third of lifetime expenditures is incurred during middle age, and nearly half during the senior years. For survivors to age 85, more than one-third of their lifetime expenditures will accrue in their remaining years.

Given the essential demographic phenomenon of our time, the rapid aging of the population, our findings lend increased urgency to understanding and addressing the interaction between aging and health care spending.