Modeling the Health and Medical Care Spending of the Future Elderly

P olicymakers face the challenge of understanding and managing future Medicare spending. Under current projections, it will rise from 2.6 percent of gross domestic product today to 9.2 percent in 2050. Demographics will be a key factor: Th e fi rst wave of baby boomers turns 65 in 2010. But what if some biomedical advance revolutionizes medical practice? What if a cure were found for one of the deadliest diseases? What if the health status of the elderly continues to improve? What if prevention eff orts become more eff ective? Would such changes ease Medicare’s fi nancing problems? To answer such questions, a team of economists and physicians from the RAND Corporation, Stanford University, and the VA [Veterans Aff airs] Greater Los Angeles Healthcare System explored how changes in medical technology, disease, and disability would aff ect health care spending for the population age 65 and older. Th eir key fi ndings: Medical innovations will result in better health and longer life, but they will likely increase, not decrease, Medicare spending. Eliminating any one disease will not save a great deal of money, but reducing obesity might be an important exception. Also, prevention eff orts focused on the most important risk factors for disease, especially those requiring costly treatments, could be very cost-eff ective.