For all the baby boomers who contributed to U.S. economic growth in the past few decades, payback time is coming. By 2010, an estimated 76 million baby boomers will join the already ballooning retired population.
Thanks to a combination of new medical advances and preventative medicines, most Americans are living longer. In fact, by 2050, the number of people age 65 or older is expected to increase by over 100 percent-from 35 million to 78 million. That trend will create a variety of problems. Among them will be difficulty funding entitlement programs like Social Security and Medicare, and the answer to that problem is still unknown.
Under the current U.S. system, funds for Medicare and Social Security are taken from the payroll taxes of the working. With an expanding retirement population accepting funds from a relatively smaller working class population, experts anticipate that either program could be depleted as early as 2010.
While it is difficult to gauge which program will suffer most, Frank Sloan, a professor in the economics department, suggested that the percentage change in healthcare costs-which is almost double that of the yearly cost of living index-along with pushes to expand Medicare benefits, will tap that program's funds first.
Although healthcare costs did not rise as dramatically in the 1990s as in previous decades, Sloan said hefty increases could begin again in the near future.
Three factors that could contribute to a spike in costs are increased use of technology, rising income levels-which are accompanied by demands for better service-and the costs of treating chronic illness. While acute illnesses were the result of most deaths in the past, today's leading causes of death tend to be prolonged illnesses such as heart disease and cancer, which require long-term and more costly medical care.
And along with the increasing costs of Medicare, many influential academics are lobbying for more coverage. Among the most popular proposals is adding prescription drug coverage for senior citizens. Many analysts think the prescription drug package, supported by both parties and President George W. Bush, will likely be passed soon.
"I think you never say 'definitely' in health policy," said Don Taylor, an assistant research professor at Duke's Center for Health Policy/Law & Management. "But when you have Republicans saying that Bush's plan [for prescription coverage] does not go far enough... then that means there is good consensus that something must be done."
Taylor added, however, that increased coverage in other areas is politically unfeasible in the near future. Both Taylor and Sloan expressed concern at the current lack of funding for long-term care. Such coverage is very limited under Medicare, and Medicaid funds-which provide institutional stays for impoverished citizens-will also probably be more limited in the near future.
Taylor believes Congress will use a combination of three methods to fix Social Security and Medicare: increasing the age of entitlement recipients, decreasing benefits and transferring more money to the fund, most likely through additional payroll taxes. The possibility of transferring money from elsewhere to the fund, Taylor said, would likely mean a reduction in President Bush's proposed $1.6 trillion tax cut.
Another option for Social Security is to create a more market-oriented system that could include placing a percentage of Social Security funds in the stock market. But Chris Conover of the Center for Health Policy/Law & Management said that many will oppose the idea. He argues that the elderly cannot handle the necessary decisions, resulting in "the most well getting the best care and the sickest, the worst."
There is also concern that the market will not be able to handle the amount of seniors needing partial or full residential care in the coming years. Still, George Maddox, director of the Long Term Care Resources Program at the Duke Center for Aging and Healthcare, said that the situation may not be as dire as originally thought. "As recently as three or four years ago, people... saw those gray hairs inundating everything in sight. But what has happened is that we are increasingly getting evidence that that situation of older Americans is changing,"
Particularly, Maddox highlighted the movement from nursing homes to assisted-living developments, which grant more independence and were once thought to be cheaper, as they are graded to the level of assistance needed. In fact, Maddox said that demand for such facilities has been so great in some areas that nursing home beds are actually being decommissioned.
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