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Federal Reserve Bank of Richmond
Economic Quarterly
The Lifetime Medical Spending of Retirees
John Bailey Jones
Mariacristina De Nardi
Eric French
Rory McGee
Justin Kirschner
Abstract

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 US 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.


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John Bailey Jones & Mariacristina De Nardi & Eric French & Rory McGee & Justin Kirschner, "The Lifetime Medical Spending of Retirees" , Federal Reserve Bank of Richmond, Economic Quarterly, issue 3Q, pages 103-135, 2018.
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Keywords: medical spending; retirees; Medicaid
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