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Medicare News
Cost of Entitlement Programs Driven by Skyrocketing
Health Care Costs, Aging Population
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Growth in Population Age 65 & Over
- shows the
percentage of U.S. population over the age of 65. The chart
shows a steady increase from 1950 where it was approximately 8%
and projects the percentage could increase to reach over 20% by
the year 2050. Click map for larger view. |
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Since 1960 health care costs have grown 2.7
percentage points faster per year than the economy as a whole
Feb. 4, 2008 There are two things that drive the
spiraling costs of the entitlement programs Social Security, Medicare
and Medicaid the aging population and the cost of health care. The
administration, in the new 2009 budget introduced today, presents a
brief but informational look at the two problems.
Health Care Costs and
Longer Life Expectancy Impact Federal Programs
The reasons for the projected
dramatic increases in costs for Medicare, Medicaid, and Social Security
are growing health care costs and an aging population.
First, since 1960, health care
costs have grown 2.7 percentage points faster per year than the economy
as a whole. This growth in overall health care costs is particularly
problematic for the Federal Government because it is the Nations
largest purchaser of health care, accounting for approximately one-third
of all health care spending in the country.
The Government provides health
care to seniors and low-income individuals through its two largest
health care programs, Medicare and Medicaid, and to veterans, active
duty military, and civilian personnel through a number of other
programs.
 In 1966, Medicare and
Medicaid accounted for only 1 percent of all Government expenditures,
but now they account for 20 percent.
The Medicare programs Board
of Trustees assumes that Medicare costs will continue to outpace overall
economic growth by an average of 1 percent per year over the next seven
decades.
Second, beginning this year,
the first of the Nations 78 million baby boomers, those individuals
born between 1946 and 1964, will begin to collect retirement benefits
under Social Security.
Three years from now,
beginning in 2011, these oldest baby boomers will be eligible for
Medicare benefits.
Compounding this unprecedented
growth in new beneficiaries are the continued growth in life expectancy
and the decline in the working population relative to the retired
population. Over the next 25 years, the share of the population aged 65
and older is forecast to increase from 12 percent to 20 percent, and the
share of the population that is working in paid employment is forecast
to fall from its current 60 percent to 55 percent.
The first factor affecting the
Governments long-term costs, health care cost growth, cannot be
predicted with certainty, but can be influenced significantly by
Government policies. The second factor, the aging of the Nations
population, can be predicted with a fair degree of certainty.
The Budget takes into account
these economic and demographic realities by proposing practical policy
changes to alleviate some of the long-term fiscal pressure that the
Government will be facing. In an attempt to reduce the growth in overall
health care costs and the costs of Medicare and Medicaid in particular,
the Budget is proposing a number of health care reforms. In addition,
the Budget proposes several sensible reforms to Social Security.
These proposals, coupled with
other Budget proposals, are important and meaningful steps to putting
the Nation on a more prudent fiscal path.
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