Correction, Dec. 31, 2012: This chart does not accurately show what I purported it showed. The data reflect only health care spending by the governments of these countries, and therefore it is unsurprising that the amount rises so much for seniors in America, because that spending represents Medicare outlays, for which young people are generally not eligible. Because of this misunderstanding, the contents of my blog post are largely no longer valid. The original post remains printed below, and my fuller explanation is here.
That per capita health care spending is higher on older people than younger ones will surprise nobody. Nor will it surprise anyone to learn that American health care spending is systematically higher than what you see in other rich countries. But this chart via Austin Frakt and Dan Munro is pretty shocking.
Starting in the mid-fifties, American per capita health care spending goes from marginally higher than Germany or Sweden to a lot higher. Then as Americans reach their late sixties, a large share of that spending is shifted onto the public books as Medicare and the spending gap keeps on rising.
Read Frakt for a bit of an account of how this arises operationally, but what I think is more important is that it arises on a meta-level because we have such a fragmented health care system. When your health care spending is all in one bucket, then at any given level of spending you face a question about how to allocate it. And when allocating spending between young and old, you're cross-pressured. On the one hand, older people have more need for health care services which militates in favor of allocating spending to them. On the other hand, providing health care services to younger people generally offers better value in terms of years of life and quality of life saved. A 25 year-old who's in a bad car accident can, if found in time and treated, still live a very happy and healthy life. If you're 95 and get into the same car accident, then treatment is going to be much more difficult, recovery will be much less complete, and in the grand scheme of things you're not going to live very long anyway.
In all countries, the majority of health care spending goes to the older half of the population distribution in deference to the greater demand for health care services among the elderly. But the less unified, less planned American system takes this to the extreme. To an extent, this reflects what people want. The "death panels" charge was a potent one for a reason. But not only is this health care spending on the elderly the key issue in the federal budget, our disproportionate allocation of health care dollars to old people surely accounts for the remarkable lack of apparent cost effectiveness of the American health care system. When the patient is already over 80, the simple fact of the matter is that no amount of treatment is going to work miracles in terms of life expectancy or quality of life.
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