Expenditures by Age

V. Key Health Policy Issues >> B. Health Spending >> Health Expenditure Patterns >> Expenditures by Age (last updated 12.2.16)

Overview

• Health spending by age. Based on a 2005 study by Laurence Kotlikoff, this chart compares U.S. to UK, Germany, Sweden and Spain in terms of per capita health spending for 8 age categories ranging from 7 to 85. Graph.
• Berhanu Alemayehu and Kenneth E Warner. The Lifetime Distribution of Health Care Costs (2004). Using private claims data, researchers calculated lifetime spending (year 2000 dollars), showing that per capita lifetime expenditure is $316,600. 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.
• Yamamoto, Dale H. Health Care Costs—From Birth to Death. June 2013. In general, the analysis shows that health care costs increase by age with the exception of the very youngest ages. Costs, on average, are very high in the first year or two of birth and drop significantly by age five. At that point, costs increase modestly through the teen years. Female costs then begin to accelerate more quickly during child-bearing ages and flatten out in the 40s before increasing again.  Male costs are relatively flat in the 20s and begin to accelerate after age 30, but remain lower on a per person basis than females in the same age group. The “cross-over age” occurs in the early 60s, when per capita spending for males exceeds that for females. Medicare costs (excluding private and Medicaid-financed long-term care) for beneficiaries age 65 and older continue to increase with age. Males continue to have higher costs than females for whom per person costs start to decline around age 90). The report includes extensive charts and tables, including a cost curve in 1-year increments from 0-64 for males, females and unisex.

Children

• Expenditures on Children by Families
• Personal Health Care Spending by Gender, Age Group and Type of Service, Calendar Year 2004 (shows per capita spending by service for U.S. children 0-18)

Adults

• Personal Health Care Spending by Gender, Age Group and Type of Service, Calendar Year 2004 (shows per capita spending by service for U.S. adults 19-64)

Elderly

Academic Studies

• Biggs, Andrew (2014). Are Rising Health Care Costs Creating a Retirement Crisis? The American 7.26.14. According to the Census Bureau’s Consumer Expenditure Survey, in 1989 the typical household over age 65 spent $3,942 (in 2012 dollars) on health insurance premiums, medical services, prescription drugs, and medical supplies, equal to 11.5 percent of after-tax income. By 2012, households’ health spending had increased by 30 percent to $5,116. But retirees’ incomes increased as well. As a result, health spending was practically unchanged at 11.6 percent of after-tax income. If health spending stays constant as a percentage of retirement incomes, there’s no reason that retirement saving should rise as a percentage of pre-retirement incomes.
• Yamamoto, Dale H. (2013). Health Care Costs—From Birth to Death. June 2013. This study includes extensive detail on Medicare spending by year of age, by service type and a table of expected costs in retirement for single retirees by age of retirement (55, 60, 65, 70) and by life expectancy (75-95 in 5 year increments), i.e., exclusive of what is paid by Medicare.
• Boston College, Center for Retirement Research (2010). Distribution of Lifetime Health Care Costs from Age 65. The research shows that the expected present value of lifetime uninsured health care costs for a typical married couple age 65 is about $197,0003 – including insurance premiums, out-of-pocket costs, and home health costs and excluding nursing home care. But a typical household has a 5-percent risk that the present value of its lifetime uninsured health care costs will exceed $311,000. And when nursing home costs are included, the amount for a typical couple increases from $197,000 to $260,000, with a 5-percent risk of exceeding $570,000.
• NCPA (2007). The Rising Burden of Health Spending on Seniors (National Center for Policy Analysis, February 2007)
• James Lubitz, Liming Cai, Ellen Kramarow, and Harold Lentzner (2003). Health, Life Expectancy, and Health Care 

  Spending among the Elderly. New England Journal of Medicine, September 11, 2003.

• Health Expenditures in Elderly Households (BLS: Current Expenditure Survey)
• Medicare and Elderly Spending on Health Care (Green Book 2004)
• Personal Health Care Spending by Gender, Age Group and Type of Service, Calendar Year 2004 (shows per capita spending by service for U.S. adults 65 & over)

Other Estimates

General Insights

• Women Need More Than Men. According to CNNMoney (12.30.15), because women live longer, a 65-year-old woman can expect to spend $22,000 more in total health care costs over the course of her retirement than a man her same age.
• Genworth Financial (2016). 2016 “Cost of Care Survey.” Details long-term care costs for homemaker services (hourly rate), home health aides (hourly rate), adult day care (daily rate), assisted living facilities (monthly rate), and nursing homes (daily rate). The report does not summarize average utilization/expenses for such services for the elderly.
• J.P. Morgan (2016). Health Care Costs in Retirement. April 2016. A prudent approach to retirement planning should anticipate increases in U.S. health care costs at the long-term historical average of about 5% per year. Because retirees tend to consume more health care as they get older, it is appropriate to assume 7% annual cost increases during retirement.

Estimates of Lifetime Spending in Retirement

• Fidelity (2016). According to NYT (3.4,16), Fidelity estimates that couples who retire at 65 in 2015 will spend $245,000 on health care during their retirement (the latest figure for 2016 is $260,000). Estimate based on the following assumptions (note 3):
  • a hypothetical couple retiring in 2015, 65-years-old, with average life expectancies of 85 for a male and 87 for a female [this is equivalent to having a 50% chance of having enough savings for retiree health costs, i.e., a couple expecting to live longer than this would need to bank more than $245,000].
  • Estimates are calculated for “average” retirees, but may be more or less depending on actual health status, area of residence, and longevity.
  • The Fidelity Retiree Health Care Costs Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, Original Medicare.
  • The calculation takes into account cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Original Medicare.
  • The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

• EBRI (October 2015). Amount of Savings Needed for Health Expenses for People Eligible for Medicare.
  • In 2012, Medicare covered 60 percent of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounted for 13 percent, and private insurance covered 15 percent.
  • In 2015, a 65-year-old man needs $68,000 in savings and a 65-year-old woman needs $89,000 if each has a goal of having a 50 percent chance of having enough money saved to cover health care expenses in retirement. If either instead wants a 90 percent chance of having enough savings, $124,000 is needed for a man and $140,000 is needed for a woman. This analysis does not factor in the savings needed to cover long-term care expenses.
  • For a married couple both with drug expenses at the 90th percentile throughout retirement who want a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings increased from $326,000 in 2014 to $392,000 in 2015.
• HealthView (2015).  2015 Retirement Health Care Costs Data Report. According to HealthView, a healthy 65-year-old couple can expect to pay, on average, $266,589 for insurance premiums and $128,365 for related expenses (dental, vision, copays and out-of-pocket bills) over their lifetime.

Calculators

• AARP. AARP’s medical savings calculator can help estimate health care costs in retirement.
• HealthView. This site provides a one-year estimate of health spending based on age and health conditions. The HealthWealthLink is a flagship healthcare expenses tool for financial advisors. It provides a) healthcare and dental expenses estimated for your state andincome level; b) life expectancy based on your health conditions, gender, and age; and c) lifetime total and year-by-year costs estimates with detailed breakdowns.