A spate of recent evidence suggests that disability among the elderly has been decreasing at least for the past two decades. This has led to claims that further innovation in medical technology could solve the Medicare financing problem without tax increases or benefit reduction, and perhaps that health promotion could lower demand for medical care and hence medical spending. But there has been little work about why disability is changing.

The explanation for the decrease in disability will have a substantial impact on the consequences of these changes for public spending. For example, if disability is falling because medical spending is increasing, disability changes may not save any money. This project combines existing data across many sources to understand disability trends among the elderly. The specific aims are to:

• decompose changes in disability into changes in disease prevalence and changes in the extent of disability conditional on disease;

• differentiate among alternative economic and social explanations for declining disability.

Three classes of theories are being examined: that disability change is a result of personal characteristics, such as socioeconomic factors and individual behaviors; that disability change results from changes in medical or assistive technologies; and that disability change results from changes in the disease environment.