Objectives. This article used a new data source to examine the issue of disability trends among elderly persons and examined the potential implications of these trends on future health and long-term care needs.Methods. We used the 1992-1996 Medicare Current Beneficiary Survey to examine time trends in rates of activities of daily living and instrumental activities of daily living disability and physical limitation among Medicare beneficiaries aged 65 and over. We used multinomial logit and least squares regression techniques to produce trend estimates that held the age, sex, race, and educational distributions constant and projected these trends into the future. Finally, we estimated the potential impact of disability decline on per capita Medicare spending on elderly persons.Results. We found that disability among elderly persons is declining and that the trend toward a more educated elderly cohort explains some, but not all, of this decline. In the absence of downward disability trends, per capita Medicare expenditures would have grown even faster than they have.Discussion. Although the decline in disability prevalence in recent years appears real, whether it continues has enormous implications for the size of the disabled population in the future and for the ability of the society to care for its disabled elderly members.NDERSTANDING trends in health and disability in older adult populations is crucial for public policy debates on pensions, retirement, and future health care spending. Considerable research has been done to gain such understanding. Some reports of trends in health and disability status have generated alarm about the possibility of rising disability rates, and other reports have produced relief from the prospect of falling rates. It is possible that both increasing and decreasing disability prevalence can be observed in the same population if trends are measured at different periods of time. However, attempts to reconcile these disparate observations raise important methodological questions about measurement of health and disability status over time.

Use of formal sources of care by community disabled elderly residents increased, likely because of changes in the Medicare home health care benefits in 1989. Increased use of home health care was associated with the concurrent use of informal care.

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