Chart of the Day: A ‘Stunning’ Drop in Health Care Costs Under Medicare
Health Care

Chart of the Day: A ‘Stunning’ Drop in Health Care Costs Under Medicare


Health care spending tends to increase with age, but a new analysis by the Kaiser Family Foundation finds that per-person spending among people aged 60 to 64 in large employer-provided insurance plans is actually significantly higher — 38% higher — than Medicare spending for people 65 to 69 years old.

“This is a stunning chart,” said Larry Levitt, the foundation’s executive vice president for health policy. “The amount it costs to provide health care to people with employer insurance rises steadily with age. Then, people turn 65 and go on Medicare, and the cost of health care drops precipitously.”

Why the huge drop? Price. As the KFF report explains, “Provider payment rates from private plans tend to be considerably higher than those paid by Medicare; for example, large employer plans pay between 1.6 to 2.5 times more than Medicare for the same type of inpatient admission. Over time, the payment rate differential has been increasing. If private plans paid the same rates as Medicare, their spending would decrease by 41%, or over $350 billion in 2021.”

A separate but related analysis published Tuesday by the Kaiser Family Foundation finds that if the Medicare eligibility age was lowered to 60, the costs for employer plans could drop by as much as 15%. Employer costs would fall by up to 30% if people age 55 and over were no longer covered by employer-sponsored insurance, and up to 43% if everyone 50 and older enrolled in Medicare.

“Lowering the age of Medicare eligibility could lower overall health care costs, but would also shift costs from employer plans to the Medicare program,” the foundation said in a news release. “Such a shift also would likely lead to lower revenues for hospitals, physicians, and providers who deliver care to older adults who choose Medicare over employer coverage.”