Objective: To learn how age and chronic illness affect costs in the Veterans Affairs healthcare system.
Study design: Veterans Affairs patients 65 years or older were identified from administrative data. We noted their healthcare utilization, cost, and diagnosis of any of 29 common chronic conditions (CCs). We examined how those 80 years or older differed from the younger patients.
Results: The Department of Veterans Affairs spent dollars 8.5 billion to treat 1.6 million older patients in fiscal year 2000. Age was less important than chronic illness in explaining cost differences. The oldest patients incurred a mean of dollars 1295 greater costs than the younger patients, primarily because they were more likely to have a high-cost CC. The oldest patients incurred higher total costs than the younger patients in only 14 of 29 groups defined by CC. Long-term care accounted for most of the extra cost of the oldest patients. When this cost was excluded, the oldest patients incurred only dollars 266 more cost than the younger patients.
Conclusions: Growth in the population of the oldest patients will increase the number of individuals with CCs requiring long-term care. With its limited long-term care benefit, Medicare will avoid much of this financial consequence. In contrast, the financial risk of acute and long-term care gives the Department of Veterans Affairs an incentive to develop strategies to prevent CCs associated with long-term care.