Address correspondence to Jack Hadley, Ph.D., Department of Health Administration and Policy, College of Health and Human Services, George Mason University, 4400 University Dr., MSN 2G7, Fairfax VA 22030; e-mail: firstname.lastname@example.org. Timothy Waidmann, Ph.D., Stephen Zuckerman, Ph.D., and Robert A. Berenson, M.D., are with the Health Policy Center, The Urban Institute, Washington, DC.
Medical Spending and the Health of the Elderly
Article first published online: 24 MAY 2011
© Health Research and Educational Trust
Health Services Research
Volume 46, Issue 5, pages 1333–1361, October 2011
How to Cite
Hadley, J., Waidmann, T., Zuckerman, S. and Berenson, R. A. (2011), Medical Spending and the Health of the Elderly. Health Services Research, 46: 1333–1361. doi: 10.1111/j.1475-6773.2011.01276.x
- Issue published online: 6 SEP 2011
- Article first published online: 24 MAY 2011
- Medicare efficiency;
- medical spending;
- health outcomes
Objective. To estimate the relationship between variations in medical spending and health outcomes of the elderly.
Data Sources. 1992–2002 Medicare Current Beneficiary Surveys.
Study Design. We used instrumental variable (IV) estimation to identify the relationships between alternative measures of elderly Medicare beneficiaries' medical spending over a 3-year observation period and health status, measured by the Health and Activity Limitation Index (HALex) and survival status at the end of the 3 years. We used the Dartmouth Atlas End-of-Life Expenditure Index defined for hospital referral regions in 1996 as the exogenous identifying variable to construct the IVs for medical spending.
Data Collection/Extraction Methods. The analysis sample includes 17,438 elderly (age >64) beneficiaries who entered the Medicare Current Beneficiary Survey in the fall of each year from 1991 to 1999, were not institutionalized at baseline, stayed in fee-for-service Medicare for the entire observation period, and survived for at least 2 years. Measures of baseline health were constructed from information obtained in the fall of the year the person entered the survey, and changes in health were from subsequent interviews over the entire observation period. Medicare and total medical spending were constructed from Medicare claims and self-reports of other spending over the entire observation period.
Principal Findings. IV estimation results in a positive and statistically significant relationship between medical spending and better health: 10 percent greater medical spending over the prior 3 years (mean=U.S.$2,709) is associated with a 1.9 percent larger HALex value (p=.045; range 1.2–2.2 percent depending on medical spending measure) and a 1.5 percent greater survival probability (p=.039; range 1.2–1.7 percent).
Conclusions. On average, greater medical spending is associated with better health status of Medicare beneficiaries, implying that across-the-board reductions in Medicare spending may result in poorer health for some beneficiaries.