Baby Boomers And Medicare

Uwe E. Reinhardt (Nov/Dec 03) argues that we need not acceptthat future per capita health spending will increase for theelderly. Reliance on per capita data, however, masks the trueimpact of the aging population on health care demand. If healthcare is left as it is today, the sheer numbers of baby boomerswill drive increased use and, therefore, spending. In the 2000census the Medicare-eligible U.S. population totaled 35.1 million.By 2030 that same population is projected to grow to 69.7 million,and by 2050 to 81.9 million.¹ Medicare Part A spending totaled$107.8 billion in 1999.² Using Reinhardt’s worst-casescenarios for per capita spending, Medicare’s annual acutecare costs would rise to $259.8 billion in 2030 and to $287.5billion in 2050. By their vastly increased numbers alone, theelderly will be consuming ever-increasing health resources overthe next half-century. The issues of improved health and longevityare further changing the equation. In the final decade of life,Medicare costs rise dramatically. The high costs associatedwith acute care and morbidity will simply be postponed to laterin life.³ Reinhardt does not address what this will mean fornonacute Medicare spending. Not only are there more Medicarebeneficiaries flowing into the system in successive years, butthey will be living longer. Thus, there will be more elderlyusing nonacute Medicare services for longer periods. The UnitedStates has yet to confront this impending reality from a policyor financing perspective. Until we do, we won’t be ableto assure baby boomers that high-quality health care will bethere when they need it. Nor will we be able to assure the generationpaying for this care that we won’t bankrupt it in theprocess.

Louis J. Ganim

Village Care of New York (New York)

NOTES

U.S. Census Bureau, Population Division, "Projections of the Total Population by Five-Year Age Groups and Sex with Special Age Categories: Middle Series, 1999–2100" (Washington: U.S. Census Bureau, January 2000).
Centers for Medicare and Medicaid Services, Health Care Financing Review: Medicare and Medicaid Statistical Supplement, 2001 (April 2003).
T. Miller, "Increasing Longevity and Medicare Expenditures" (Unpublished paper, University of California, Berkeley, Center for the Economics and Demography of Aging, November 2000).

The author responds:

Louis Ganim appears to have missed the thrust of my paper. Ido not deny that if the growth trends of health spending onall age groups during the past thirty years persist for anotherthirty years, our health system will absorb somewhere closeto 30 percent of gross domestic product (GDP) by 2030. It isso because Americans seem to prefer a health system in whicha highly fragmented and consequently weak demand side can bemade to use and pay for whatever new technology and treatmentintensity the supply side chooses to proffer. My only pointwas that the aging of the population per se does not drive thesegrowth trends very much through the demand side. If we couldfreeze the fraction of our population age sixty-five and olderat current levels, it would not give us much relief in healthspending. In 2030 we would still spend a lot more on the elderlythan we do now, and, of course, on all other age groups as well.The focus of our health policy debate should be on the extrabenefits we gain by letting health spending grow as rapidlyas it does for all age groups, not simply on the growing numberof elderly people in our midst.

Uwe E. Reinhardt

Princeton University (New Jersey)

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