How the aging population will affect healthcare cash flow

BVWireIssue #152-1
May 6, 2015

Over the next five years, the increase in age of the U.S. population will have positive and negative effects on the bottom line for both profit and nonprofit hospitals, according to the latest Healthcare Quarterly (purchase required) from Moody's Investors Service. In 2010, 13% of U.S. residents were age 65 or older. By 2030, that percentage will increase to 20%, says Moody’s.

Counteracting forces: An older population increases demand for medical services, which will be a positive. As utilization increases, hospitals can leverage their existing resources and spread their fixed costs, which benefits earnings and cash flow, says the report. However, the revenue mix will change because, as baby boomers retire and leave the workforce, a higher percentage of the population will be eligible for Medicare. "This shift away from commercial, employer-based insurance to Medicare will be detrimental to hospital earnings as reimbursement from government programs is usually lower than that realized from commercial insurers," according to Moody's.

Overall, U.S. healthcare expenditures will increase by 25% by 2030 due to the higher cost of caring for those age 65 or older. That increase will cause Medicare and private payers to put pressure on providers to cut costs.

Please let us know if you have any comments about this article or enhancements you would like to see.