The Lifetime Medical Spending of Retirees

John Bailey Jones, Mariacristina De Nardi, Eric French, Rory McGee, Justin Kirschner

NBER Working Paper No. 24599
Issued in May 2018, Revised in July 2018
NBER Program(s):Health Care, Health Economics, Public Economics

Using dynamic models of health, mortality, and out-of-pocket medical spending (both inclusive and net of Medicaid payments), we estimate the distribution of lifetime medical spending that retired U.S. households face over the remainder of their lives. We find that households who turned 70 in 1992 will on average incur $122,000 in medical spending, including Medicaid payments, over their remaining lives. At the top tail, 5 percent of households will incur more than $300,000, and 1 percent of households will incur over $600,000 in medical spending inclusive of Medicaid. The level and the dispersion of this spending diminish only slowly with age. Although permanent income, initial health, and initial marital status have large effects on this spending, much of the dispersion in lifetime spending is due to events realized later in life. Medicaid covers the majority of the lifetime costs of the poorest households and significantly reduces their risk.

A non-technical summary of this paper is available in the 2018 number 3 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w24599