Fact Sheet
H EALTH
Life Expectancy Is Better Than Age as a General Predictor
of Health Care Expenditures
CHILD POLICY
CIVIL JUSTICE
EDUCATION
ENERGY AND ENVIRONMENT
HEALTH AND HEALTH CARE
INTERNATIONAL AFFAIRS
NATIONAL SECURITY
POPULATION AND AGING
PUBLIC SAFETY
SCIENCE AND TECHNOLOGY
SUBSTANCE ABUSE
TERRORISM AND
HOMELAND SECURITY
TRANSPORTATION AND
INFRASTRUCTURE
WORKFORCE AND WORKPLACE
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RAND Corporation research
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I
ncreasing longevity, coupled with declining fertility rates, will substantially increase the number of U.S.
octogenarians. Given the link between age and health care costs, some researchers have predicted that,
as a result, health care costs will rise sharply.
A RAND Health team used the 1992–1999 Medicare Current Beneficiary Survey to investigate
whether age directly affects health care costs, or whether life expectancy would produce more accurate
estimates of future expenditures. The analysts also examined whether including information about health
status affected the predictive power of age or life expectancy. The study came to the following conclusions:
O Life expectancy is a better predictor
12,000
of health care expenditures than age.
11,800
Expenditure estimates based on life
11,600
By life expectancy
expectancy match actual expenditures
11,400
more closely than age-based estimates
By age
11,200
(see the top figure).
11,000
ONeither age nor life expectancy has
10,800
strong predictive power if health
10,600
status is included in the model.
Actual spending
10,400
(adjusted)
OExpenditure projections based on life
10,200
expectancy are lower than age-based
10,000
1992
1994
1996
1998
projections (see the bottom figure).
Year
The gap between estimates increases
as life expectancy increases (life
expectancy at birth is projected to
1,600
increase from 77.5 in 2008 to 79.7
1,400
By age (total)
in 2040 and to 82.0 in 2080). For
1,200
example, in 2040, age-based projec1,000
tions of total expenditures are 9 perBy life expectancy (total)
cent higher than projections based on
800
life expectancy; in 2080, age-based
600
estimates are 22 percent higher.
By age (inpatient)
400
If people are living longer because
200
By life expectancy (inpatient)
medical technology, high-quality health
0
care, healthy individual behaviors,
2000 2010 2020 2030 2040 2050 2060 2070 2080
and decreased environmental hazards
Year
(among other factors) improve health,
NOTE: Inpatient costs were computed as 25 percent of total costs,
then future Medicare beneficiaries will
reflecting data from 2004.
be healthier than current beneficiaries
and projections based on age will overestimate future health care expenditures. If technology is keeping people alive longer, but in poor health, then projections based on life expectancy will underestimate
future health care expenditures. The study found evidence supporting the former.
Per-capita health care expenditures
(2008 dollars)
THE ARTS
Total health care expenditures
(billions of 2008 dollars)
RAND RESEARCH AREAS
This fact sheet is based on: Shang B, and Goldman D, “Does Age or Life Expectancy Better Predict Health Care Expenditures?” Health Economics, Vol. 17, No. 4, April 2008, pp. 487–501.
The RAND Corporation is a nonprofit research organization providing objective analysis and effective solutions that address the challenges facing the public and private
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RB-9362 (2008)
THE ARTS
CHILD POLICY
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CIVIL JUSTICE
EDUCATION
ENERGY AND ENVIRONMENT
HEALTH AND HEALTH CARE
INTERNATIONAL AFFAIRS
NATIONAL SECURITY
This product is part of the RAND Corporation
research brief series. RAND research briefs present
policy-oriented summaries of individual published, peerreviewed documents or of a body of published work.
POPULATION AND AGING
PUBLIC SAFETY
SCIENCE AND TECHNOLOGY
SUBSTANCE ABUSE
TERRORISM AND
HOMELAND SECURITY
TRANSPORTATION AND
INFRASTRUCTURE
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organization providing objective analysis and effective
solutions that address the challenges facing the public
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