Press Releases

NEW CMS STUDY SHOWS MEDICARE, MEDICAID PAID FOR MORE THAN HALF OF ALL SENIOR HEALTH CARE

The average person in the United States consumed $3,834 in personal health care goods and services in 1999, though the amount varies considerably by age group. People age 65 or over spent $11,089, about half of which was paid by Medicare and another 15 percent paid by Medicaid, according to a report prepared by the Office of the Actuary of the Centers for Medicare & Medicaid Services (CMS).

The information appears in a Web Exclusive, published on-line by Health Care Financing Review, and may be found at http://cms.hhs.gov/review/default.asp under the title Age Estimates in the National Health Accounts.  This is the first time since 1989 that health spending estimates by age have been published.

"What this report shows is the importance of our efforts to bring down the high cost of health care for America's seniors," said CMS Administrator Mark B. McClellan, M.D., Ph.D.  "Working with Congress we have a variety of initiatives in action to do just that, beginning now with lower prescription drug costs."

Nearly six million Medicare beneficiaries have signed up for Medicare-approved prescription drug discount cards. Independent studies have shown those cards are saving beneficiaries significant costs on prescription drugs, with low-income seniors saving up to 90 percent. Information on competitive prices, generic drugs and alternative drugs is helping bring down prices. Seniors will save even more beginning in 2006, when Medicare begins offering a comprehensive prescription drug benefit. Low-income beneficiaries will save up to $3,500 per year as part of the new benefit.

Beginning January 1, 2005, new preventive benefits in Medicare will help, considerably, to bring down costs and improve the health and quality of life of seniors by preventing complications and hospital readmissions.  As part of these new benefits, all new Medicare enrollees will receive a free Welcome to Medicare physical examination.

Medicaid is also making health care more affordable for low-income Americans. Today, some 56 million individuals are receiving services through either Medicaid or the State Children's Health Insurance Program (SCHIP). Under President George W. Bush, more than 4,250 state plan amendments, waivers and demonstrations have been approved, which has led to greater access and enhanced benefits to those who need it most. CMS estimates that approximately 2.6 million individuals will become eligible for Medicaid or SCHIP when these expansions are fully implemented, and approximately 7.5 million will have improved coverage.

CMS also is conducting demonstrations to cut costs and improve health through better coordination of care and disease management.  Pay-for-performance demonstrations and other quality measures are also targeted at improving care and lowering costs.

The report finds that per capita spending for health care for working-age adults - people who are age 19 to 64, was $3,352, with private health insurance as the dominant payer. Children 18 or younger consumed the least amount of health care, $1,646 per person, with private health insurance and Medicaid as the major payers.

People, 65 or over, made up 13 percent of the population in 1999, yet consumed 36 percent of the nation's spending for personal health care. This spending totaled $387 billion or $11,089 per person, quadruple the amount of per person spending, $2,793, for people under age 65.

Medicare financed 46 percent of the health care spending for seniors in 1999 while Medicaid financed more than 15 percent.  The Medicare Modernization Act of 2003 will, accordingly, increase the percent paid by Medicare because of important new benefits such as the prescription drug benefit.

Working-age adults were 59 percent of the population and accounted for 51 percent of personal health care spending in 1999. This spending amounted to $547 billion or $3,352 per person.  Private health insurance paid for 47 percent of that, while out-of-pocket payments and Medicaid, paid for approximately 18 and 15 percent, respectively.  Working-age adults accounted for 61 percent of all prescription drug spending.

Children made up 29 percent of the population, but accounted for only 12 percent of spending on personal health care in 1999.  This spending amounted to $131 billion or $1,646 per child. Children's health care is primarily financed through private health insurance and Medicaid; together, these sources paid for over two-thirds of health care for children. Hospital and physician services accounted for 70 percent of health spending for children in 1999.

Age Estimates in the National Health Accounts reports that, over the next several decades, the combination of higher relative health spending by seniors and their faster population growth will increase pressure on public funding over the next several decades.

The authors use these age estimates to show the future effect of the changing age-mix of the population on health care spending.  The simulation results show that, as a source of funding, nursing homes and Medicare are the most likely affected by projected demographic changes over the next 50 years.

The report also highlights some of the recent trends in health spending by age in three recent points in time: 1987, 1996, and 1999. The health care spending by age data can be found on the CMS web site at http://www.cms.hhs.gov/statistics/nhe/age.