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Keywords:

  • Value of spending;
  • population aging;
  • health care spending;
  • multistate life table;
  • microsimulation

Objective

To estimate the cost of an additional disability-free life year for older Americans in 1992–2005.

Data Source

This study used 1992–2005 Medicare Current Beneficiary Survey, a longitudinal survey of Medicare beneficiaries with a rotating panel design.

Study Design

This analysis used multistate life table model to estimate probabilities of transition among a discrete set of health states (nondisabled, disabled, and dead) for two panels of older Americans in 1992 and 2002. Health spending incurred between annual health interviews was estimated by a generalized linear mixed model. Health status, including death, was simulated for each member of the panel using these transition probabilities; the associated health spending was cross-walked to the simulated health changes.

Principal Findings

Disability-free life expectancy (DFLE) increased significantly more than life expectancy during the study period. Assuming that 50 percent of the gains in DFLE between 1992 and 2005 were attributable to increases in spending, the average discounted cost per additional disability-free life year was $71,000. There were small differences between gender and racial/ethnic groups.

Conclusions

The cost of an additional disability-free life year was substantially below previous estimates based on mortality trends alone.