Seniors - Issues Driving Increases In Medical Costs
The 5 issues that are driving up cost increases in medical costs for senior citizens in the US are 1) inflation of healthcare costs, 2) population growth, 3) concentrated costs before death, 4) rising disease incidence and 5) rising drug prices. We have outlined our key findings below.
JAMA 2017 STUDY ON FACTORS BEHIND HEALTHCARE COSTS INCREASE (US)
- HealthData.org reported the findings of a 2017 study published in the Journal of the American Medical Association (JAMA) discussing the cost drivers of rising healthcare costs in the US.
- These cost drivers are "(1) more people; (2) an aging population; (3) changes in disease prevalence or incidence; (4) increases in how often people use health care services; and (5) increases in the price and intensity of services."
- The listed factors apply or are indirectly applicable to increases in senior healthcare costs as well, discussed individually below.
POPULATION GROWTH And aging
- The US Census Bureau forecast a 50% increase in the number of senior citizens from 2012 to 2050 to reach 83.7 million elderly people.
- The number of US citizens aged 85 and older will also grow at a faster rate than the working- age segment during the forecast period.
- The 2017 JAMA study positively associates the increase in US population with a 23.1% rise in spending increase totaling $269.5 billion.
- Dr. Joseph Dieleman, the study's lead author, said, “People getting older led to a 12% increase in spending, and increases in price and service intensity, that is the variety and complexity of services, led to a 50% increase in spending.”
- More people including elderly patients will drive up costs both in federal care and out-of-pocket expenses.
- The New York Times reported that Republican policies are pushing to "require seniors to pay more" in view of rising out-of-pocket costs, predicted to account for 26% of all income by 2020.
INFLATION (HEALTHCARE COSTS)
- The Motley Fool states that inflation directly affects seniors in the area of healthcare costs.
- Healthcare expenses are expected to rise at an annual rate of 5.47%, more than twice the rate of Social Security cost-of-living adjustments.
- The article poses a hypothetical case: "The average 65-year-old couple today will spend just $404,253 on medical care in retirement ("just" being a relative term), while the average 55-year-old couple today is looking at $498,962. That sizable jump to $635,142, therefore, is largely a product of inflation."
- While Social Security will cover about 40% of a worker's income, most seniors need at least 80% simply to cover their bills including healthcare costs.
CONCENTRATED COSTS BEFORE DEATH
- A 2017 study published in the National Center for Biotechnology Information (NCBI) reports that healthcare costs will more than double between age 70 and 96, rising from $7,566 to $16,145.
- The Journalists' Resource reported that medical care spend exceeds $25,000 for US seniors in their 90s and primarily covers nursing home costs.
- A 2016 study published in Wiley reported a spike in medical expenses before death, specifically in the last year of life.
- Seniors' healthcare spend averaged $43,030 during the last year of life or nearly six times the average spend for the general population. This was also more than twice the average healthcare spend of seniors aged 65 and over.
RISE OF DISEASE INCIDENCE
- The 2017 JAMA study reported only a minor increase in spending associated with disease incidence and prevalence, but this varied by condition.
- HealthData.org reported that health care spend increased due to specific diseases and health conditions, as well as the types of care necessary for medical care.
- HealthData.org provided a visualization of the report showing that the top diseases and spending for all ages were closely driven by the top diseases for seniors: cardiovascular, chronic respiratory and neoplasms.
- TXCIN cited a study showing that chronic disease coupled with population growth accounted for a disproportionate portion of overall health spend.
RISING DRUG PRICES
- Reuters reported that prescription drugs' annual growth rate will reach an average of 6.3% in the next decade.
- The projected spike in growth rate is due to higher drug prices as well as increased use of specialty drugs.
- The average price of branded drugs used by older US citizens increased 4x than the rate of inflation in 2017, according to the Rx Price Watch Report.
- Senior US citizens (who take an average of 4.5 drugs each month) will eventually be unable to buy prescription drugs should current price hikes continue.
- This, in turn, leads to worse health outcomes and higher medical costs in the future.