Roybal Center for Health Policy Simulation

Moving health simulation findings into programs, practices, and policies

The Future Elderly Model

The Future Elderly Model (FEM) is an economic-demographic microsimulation developed over the last decade by researchers with funding from the Centers for Medicare and Medicaid Services, the National Institute on Aging, the Department of Labor, and the MacArthur Foundation. Its development is led by the USC Roybal Center for Health Policy Simulation, with collaborators from Harvard University, Stanford University, RAND Corporation, University of Michigan, and University of Pennsylvania.

Center researchers have used the FEM to explore a variety of policy questions, ranging from the fiscal future of the U.S., to the role biomedical innovation can play in future health outcomes. The Center has produced 55 peer-reviewed manuscripts, including two special issues of Health Affairs devoted to FEM findings. FEM findings have been featured by several government agencies (in both the White House and Congress) and private organizations interested in aging policy. FEM research has resulted in approximately $15 million in additional funding beyond its core grant, prizes from both Research!America and the MetLife Foundation for impact, and frequent reference in the national and social media. FEM findings are the centerpiece of a National Academy of Science report.

Specific issues analyzed with the FEM include:


Value of delayed aging. Recent scientific advances suggest that slowing the aging process (senescence) is now a realistic goal. Yet most medical research remains focused on combating individual diseases. Roybal Center researchers used the FEM to compare optimistic “disease specific” scenarios with a hypothetical “delayed aging” scenario in terms of the scenarios’ impact on longevity, disability, and major entitlement program costs. Delayed aging could increase life expectancy by an additional 2.2 years, most of which would be spent in good health. The economic value of delayed aging is estimated to be $7.1 trillion over fifty years. In contrast, addressing heart disease and cancer separately would yield diminishing improvements in health and longevity by 2060-mainly due to competing risks. Delayed aging would greatly increase entitlement outlays, especially for Social Security. However, these changes could be offset by increasing the Medicare eligibility age and the normal retirement age for Social Security. Overall, greater investment in research to delay aging appears to be a highly efficient way to forestall disease, extend healthy life, and improve public health.

Fiscal implications of the widening SES gradient in life expectancy. Mortality gradients by education and income have been rising in the United States and elsewhere. The effect of the rising gap in life expectancy on Social Security progressivity has received relatively little attention, and the impact on Medicare has received effectively none. Researchers used the FEM to estimate the effects of the increased mortality gap on the progressivity of Social Security and Medicare benefits for those born between 1928 and 1990. They found significant reductions in progressivity of both programs based on recent mortality trends. Offsetting the impact of the growing gradient in mortality rates on lifetime benefit progressivity—without raising benefits — would require reducing top quartile benefits by approximately $11,000 annually.

Value of health improvement at older ages. Researchers used the FEM to assess the fiscal benefits of a healthier American population, both in terms of reduced health care spending, reduced government assistance, and increased tax revenues. For example, in 1975, 50-year-old Americans could expect to live slightly longer than most of their Western European counterparts. By 2005, American life expectancy had fallen behind that of most Western European countries. We find that this growing longevity gap is primarily due to real declines in the health of near-elderly Americans, relative to their Western European peers. Gradually moving American cohorts to the health status enjoyed by Western Europeans could save up to $1.1 trillion in discounted total health over 45 years.

Global pharmaceutical policy and health. Researchers developed a version of the FEM to analyze the impact of policy changes on innovation and future health. The results demonstrated that price controls are likely to harm future generations in the United States and Europe. More specifically, U.S. consumers generate more pharmaceutical revenue per person than Europeans do. This has led some U.S. policymakers to call for limits on U.S. pharmaceutical spending and prices. Researchers used the FEM to analyze the welfare impacts of lowering U.S. prices toward European levels. Price controls generate social costs that are an order of magnitude higher. In contrast, publicly financing reductions in consumer prices, without affecting manufacturer prices, delivers benefits in virtually all plausible cases. Similar harmful effects are seen if the FDA relaxes regulations around data exclusivity.

Medicare reform. The anticipated growth in Medicare spending is a major burden on the federal budget. Researchers used the FEM to estimate three scenarios to reform Medicare, including means-tested Medicare premiums and increasing the eligibility age for the program to 67 years of age. These scenarios would lead to reductions in cumulative Medicare spending of 2 to 24 percent. However, the scenarios also would increase out-of-pocket spending for enrollees and, in some cases, cause millions of seniors not to enroll in the program.

Technological advances and their consequences for spending and mortality. Researchers have explored scientific progress and its likely impact on mortality, disability, and spending. Additional analyses have parsed specific developments in cancer and obesity. Because healthier people live longer, cumulative spending varies little with a beneficiary’s disease and disability status upon entering Medicare. Ten of the most promising medical technologies are forecast to increase spending greatly. It is unlikely that a “silver bullet” will emerge to both improve health and dramatically reduce medical spending.

Consequences of obesity in older Americans. Obesity is recognized as an important public health problem, and it could have serious consequences for older cohorts. In a series of studies, researchers used the FEM to estimate lifetime costs, life expectancy, disease, and disability for 70-year olds based on body mass; the consequences of obesity in younger cohorts for disability and mortality; and the value of treatments for obesity and diseases associated with obesity. For example, results from the FEM indicate substantial social value of bariatric surgery for treated patients, with incremental social cost-effectiveness ratios typically under $10,000 per life-year saved. On the other hand, pharmaceutical interventions against obesity yield much less social value with incremental social cost-effectiveness ratios around $50,000.

Disability in older populations. In a series of articles, researchers used the FEM to forecast the impact of changing disability rates on spending by Medicare beneficiaries, accounting for differential spending trends among the disabled. The latter adjustment is important because the composition of the disabled population—and the intensity of treatment for the disabled—are changing.

Burden of chronic disease among the elderly. Researchers used the FEM to examine the impact of selected chronic diseases on the distribution of health care expenditures and the variation in spending over the course of disease. A 65-year-old with a serious chronic illness spends $1,000 to $2,000 more per year in health care services than a similar adult without the condition. However, cumulative Medicare payments are only modestly higher for the chronically ill due to their shorter life expectancy. With respect to diabetes, specifically, we find that interventions—new technologies, public policies, or clinical approaches—that double the rate of initiation of insulin generate a value on average of more than $15,000 over the lifetime of a patient developing diabetes between ages 51 and 60 years, or $12.6 billion in the aggregate.

Age versus life expectancy as a predictor of health care spending. Researchers used the FEM to predict life expectancy, and then used regression analyses to compare the predictive power of the two variables in explaining health care expenditures. Age has little additional predictive power on health care expenditures after controlling for life expectancy, but the predictive power of life expectancy itself diminishes as health status measures are introduced into the model. Using life expectancy rather than age results in lower projections of future health care expenditures, suggesting that increases in longevity might be less costly than models based on the current age profile of spending would predict.