Need for Reform: Aging Population

In the year 2011, the first wave of the baby boom generation will turn 65, eligible for Medicare. As the baby boomers grow older, their projected medical costs will have a monumental negative impact for individuals, organizations and the nation. These projections demand urgent and timely solutions to reform not just Medicare, but the entire health care system.

Startling Projections: Aging and Medical Costs

During the next few years, per capita health care spending is projected to rise from about $7,100 in 2006 to an estimated $12,300 by 2015, a 73 percent increase. The two primary factors driving the increase are:

The number of people over age 65 is projected to grow from 37 million to almost 46.5 million. By 2015, people over 65 will account for about 18 percent of the overall population, or almost one in every five people.

Not surprisingly, people tend to have higher medical bills as they get older. According to the federal Agency for Healthcare Research and Quality, 5 percent of Americans averaged $11,500/year and accounted for 49 percent of all health care spending in 2002. One in four of these people was between ages 65 and 79 and one in six was 80 or older

Source: www.ahrq.gov
Aug. 23, 2005, U.S. Agency for Healthcare Research and Quality

Negative Impacts

The growth in Medicare, and overall health care spending, affect:

Individuals in Retirement
Medical costs threaten the ability of individuals to make stable financial plans for retirement. Catastrophic or chronic medical conditions can wipe out individuals' retirement accounts.

Organizations with Retired Employees
Within the public and private sectors, organizations are grappling with how to cover the rising costs for health care benefits for retired employees and many are reducing or eliminating retiree health benefits altogether.

From 2006 until 2015, overall costs for health care are projected to rise from 16 percent of GDP (gross domestic product) to about 20 percent of GDP.

In the coming decades, Medicare spending will loom larger within the federal government, increasing from about 2.3 percent of GDP in 2000 to 6.8 percent by 2010.

By consuming an ever-growing percentage of the GDP, higher health care costs draw resources away from other aspects of the economy. To make up the unfunded liability of Social Security and Medicare (most of which is for Medicare) in the year 2020 will require more than 25 percent of all income taxes. That rises to 50 percent of all income taxes in 2030.

Sources

U.S. Agency for Healthcare Research and Quality
www.ahrq.gov

U.S. Department of Health & Human Services
Centers for Medicare & Medicaid Services
www.cms.hhs.gov

The Commonwealth Fund
www.cmwf.org

The Kaiser Family Foundation
www.kff.org