in Labor Statistics

$Y

U.S. Department of Labor
Bureau of Labor Statistics

Health Expenditures and the Aging Population

One of the major demographic changes af-
fecting the United States is the aging of the popu-
lation. This trend will continue for the next sev-
eral years as the “baby boomers” continue to
age. The Bureau of Labor Statistics consumer
expenditure data may be used to compare some
of the trends in spending patterns for those 65
years of age and older and those under 65.

One important factor is the increasing pro-
portion of the population accounted for by older
consumer units.’ The proportion of all con-
sumer units whose reference person is older than
65 increased to 21.2 percent in 1995 from 19.8
percent in 1984, Given the growth of the popu-
lation, this represents an average increase of
approximately 816,000 consumer units per year,
due mainly to the growing number of the most
senior members of this group, that is, those aged
75 and older.

Consumer units whose reference person is
at least 65 years old account for a significant
portion of consumer spending. In 1984, this
group accounted for $1 in every $8 spent. By
1995, for every $7 spent, $1 came from a con-
sumer unit whose reference person was at least
65 years old. But what are the ramifications of
this increase for less aggregated expenditures?
Assuming that older consumers have different

"Consumer units are the standard unit of comparison
for the Consumer Expenditure Survey. A consumer
unit is defined as members of a household related by
blood, marriage, adoption, or other legal arrangement;
a single person living alone or sharing a household
with others but who is financially independent; or
two or more persons living together who share re-
sponsibility for at least two out of three major types
of expenses—food, housing and otherexpenses. Stu-
dents living in university-sponsored housing are also
included in the sample as separate consumer units.

2 Expenditures by the group aged 75 and older are
still the most volatile for either category, but the
pattern appears to fluctuate less for medical

services than supplies.

Summary 97-12
November 1997

tastes, preferences, or physical needs than
younger ones, they will also have different ex-
penditure patterns. Reflecting their changing
physical condition, a major component of
spending among the elderly is for health care.
In general, those aged 75 and over are presum-
ably at the greatest risk for incurring health care
costs. The overall increase in real total health
care expenditures from 1984 to 1995 is much
higher for older consumers than for younger
ones. Expenditures rose about 8 percent for the
younger group, while the older groups each
increased their health care expenditures by over
20 percent. This expenditure component also
appears to be more volatile than other expen-
ditures, at least for those aged 75 and older.
Among all expenditures, those for medical ser-
vices and supplies appear to vary the most from
year to year. In the most extreme case, expen-
ditures for medical services by those aged 75
and over fell from $1,078 in 1986 to $601 in
1987, and rose to $1,099 in 1988.

The chart reveals some interesting patterns
in spending on health insurance. Between 1984
and 1986, shares for health insurance for all
groups decreased. They then began to increase
and have done so more or less continuously.
Although divergence in shares has cxisted for

the two older segments (65 to 74 years and 75
and older), both shares were at about 58 percent
in 1995. The rate of increase in the share for the
oldest group (75 and older) has been steeper than
for the 65- to 74-year-old group in the last few
years However, the share for those aged 75 and
older also fluctuates dramatically, so it is diffi-
cult to predict whether or not the share for them
will soon go on to exceed the share for those
aged 65 to 74.

Shares of total health care spending going to
medical services and medical supplies have de-
creased over time; medical services, however,
have been less volatile than supplies.” Expendi-
tures by the group aged 75 and older are still the
most volatile for either category, but the pattern
appears to fluctuate less for medical services than
supplies. For all age groups, shares for medical
services have declined since 1987.

Real expenditures for prescription drugs are
fairly stable for younger consumer units, fluctu-
ating in a relatively narrow band betwecn $200
and $240 from 1984 to 1995. For older con-
sumers, over the same period, these expenditures
rose substantially, from $402 to $536 for those
aged 65 to 74, and from $420 to $556 for thos
aged 75 and over. This constitutes an increase
of about one-third in real dollars for each of the

age groups, 1984-95
Percent

Health insurance expenditures: Shares of all health care expenditures by

70

65-74
Sand oider

1984 1985 1986 1987 1988 1989

1990

NOTE: Percents are the percentage of health care expenditures all

1991 1992 1993 1994 1995

d to health i

surance,



Number of consumer units and real (1995 dollar) expenditures by age group, 1984-95

Characteristic 1984 | 1985 | 1967 1989 | 1991 | 1993 1995
Number of consumer units (000) | 90,223 } 91.564] 94,150] 95,818 | 97,918 | 100,049 | 103,129
Under 65 72.357 | 72,919| 74.378| 75,496 | 77,216] 78,189 | 81,330
651074 40,761 | 11,302} 11,578) 11,848 | 11,995] 11,934] 11.933
75 and older 7105 | 7,343] 8194) 6,474] 8767] 9,926] 9,860
Percent of total consumer units
Under 65 8o2| 796| 790] 7e8| 789| 782 78.9
651074 ino] 123} 123) 24] 122} 119 116
75 and older 79 80 87 a8 9.0 99 96
Average annualexpenditures —_| $32,283 |$93,270} $92,753] $34,179 | $33,196 | $92,370 | $92,264
Under 65 ‘35,194 | 35,983] 35,707) 37,104 | 36,113] 35,147] 34,949
651074 23.237 | 25,407} 25,389] 25,966 | 25,248 | 25,002 | 25,277
75 and older 46.314 | 18.430] 16.407} 19.565 | 17,659] 19,353] 18,572
Percentof alt consumer spending} 100.0 | 100.0] 100.0) 100.0] 1000} 1000} 100.0
Under 65 e74| ect) 861] 355} 85.9] 849 65.4
6510 74 86 94 95 94 93 92 9.3
75 and older 40 44 44 54 48 59 55
Health care
(average annual expenditures) | $1,539 | $1,569] $1,523) $1,729 | $1,739] $1,873] $1,732
Under 65 iia7a. | 1,972] 1,939] 1,488] 1,526] 1,591] 1.487
6510 74 2i7e | 2.336] 2265) 2435) 2,574] 2,753] 2,618
75 and older 2206 | 2345} 2141] 2,089] 2458] 3,041) 2,683
Percent ot ali health care 100.0] 100.0] 1000] 1000} 100.0} 100.0] 100.0
Under 65 718] 696] 695| 678] 69.3] 664 677
65074 169] 1a4| 183} 174] 180) 175 175
75 and older 113 | 120] 122) 148] 127] 164 14.8

NOTE: Health care is defined to include out-of-pocket consumer expenditures only.

older groups.

Despite this increase in real dollars spent on
drugs by older consumers, there has been little
increase in total drug expenditures as a share of
all health care. For all consumer units older
than 65, the share of health care allocated to
drugs rose from about 19 percent in 1984 to 21
percent in 1995. For those aged 65 to 74, drug
expenditures peaked in 1990 und 1995, when
the share reached 20.7 percent, Drug expendi-
tures were at their lowest in 1991, 18.3 percent
For consumer units aged 75 and older, drug ex-
penditures ranged from 17.4 percent in 1988 to
22.5 in 1990.

For more information about the data pre-
sented here, contact Geoffrey Paulin in the Di-
vision of Consumer Expenditure Surveys at
(202) 606-6900. To find these data on the
Internet, go to the Consumer Expenditure Sur-
veys home page (address: http://stats.bls. gov:
80/csxhome.htm). To obtain historical data from
the Consumer Price Index, call (202) 606-7000.

Material in this publication is in the public
domain and, with appropriate credit, may be
reproduced without permission. This informa-
tion is available to sensory impaired individu-
als upon request. Voice phone: (202) 606-7828;
TDD phone: (202) 606-5897; TDD message
referral phone: 1-800-326-2577.