12 TABLE 1.4 PER CAPITA HEALTH CARE COSTS EXPENDITURES FOR PERSONS AGED 65 AND OLDER IN 1977, 1980, 1987 AND 1988 SOURCES: House Select Committee on Aging, October 1988; Health Care Financing Administration, July 1984 and October 1988; Census Bureau, 1988. With respect to costs paid by the elderly themselves, the growth rate between 1977 and 1988 was slightly higher than the overall rate for all payers combined. As a result, the 1988 level is about 3.4 times the level of 1977. Again the trend shows no sign of slowing down as the annual increase between 1987 and 1988 was 10.6 percent twice the rate for the Consumer Price Index (CPI-W). - over 13 Clearly, Medicare is facing problems with rising health care costs as well. Between 1977 and 1988, Medicare costs for the elderly grew from $713 per capita to $2,303 per capita a rate that is just slightly slower than the rate of growth for elderly out-of-pocket costs. The Medicare data for 1987 and 1988 shows Medicare costs continuing to grow over one and one-half times faster than the Consumer Price Index (CPI-W). For the two primary payers of elderly health care, the elderly themselves and Medicare, health care costs have been and continue to be growing at very high rates and show no sign of a significant slowdown. The signs for slowing Medicare cost growth have improved due to aggressive cost cutting over the past decade. However, no one is sure of the consequences of that cost cutting for health care access and quality. For the elderly, there has been no progress since federal cost containment efforts fail to control many of their costs. 14 SLOW GROWTH IN ELDERLY INCOME In order to provide a better perspective on the problem created by rapidly rising health and long term care costs, there is a need to look at what is happening to the elderly's ability to pay these costs. Since health and long term care costs increases show little sign of slowing down, it is also important to look at both the past and the future. Though some elderly are already in severe difficulty, the future is likely to be even more problematic. SOCIAL SECURITY COST-OF-LIVING-ADJUSTMENTS. Social Security, a primary source of income for millions of current and future elderly, ties its annual cost-of-livingadjustments (COLAs) to the Consumer Price Index for Urban Wage Earners (CPI-W). Since 1978, Social Security COLAS have fluctuated greatly as has general price inflation. (See Figure 2.1 and Table 2.1) COLAS have ranged everywhere from as low as 1.3 percent to as high as 14 and 11 percent in 1980 and 1981 respectively. For the 1977 through 1990 period, the COLA averaged 6.1 percent annually. In the President's 1991 budget proposal, the Administration estimates that the COLA for the upcoming year will be 3.9 percent and the projected average for 1991 through 1995 is 3.7 percent. While the Social Security COLA has kept pace with general inflation, questions remain over how well the COLA measures change in elderly costs. As one prime example, health care costs have consistently outpaced inflation (as noted above) and are likely to do so in the future. SOCIAL SECURITY MONTHLY BENEFIT PAYMENTS. Another way of looking at changes in the elderly's ability to pay is to look at average monthly Social Security payments for retired workers. (See Figure 2.1 and Table 2.1) Over the 1977 through 1988 period, there has been growth, but again at a relatively slow rate. Between 1977 and 1988, the average monthly Social Security benefit for all of those in current-pay status (i.e., all those receiving payments in that year) slightly more than doubled from $243 per month to $537 per month. 15 FIGURE 2.1 TRENDS IN SOCIAL SECURITY COST-OFLIVING ADJUSTMENTS FOR 1977 THROUGH 1995 AND AVERAGE MONTHLY SOCIAL SECURITY PAYMENTS TO RETIRED WORKERS FOR 1977 THROUGH 1988. Monthly Social Security Payments If one looks at monthly benefits for those beneficiaries awarded Social Security benefits in a given year, the growth is slower. In part, this is due to the fact that retirees in the late 1970s and very early 1980s received slightly higher Social Security payments than those retiring after 1981. Between 1977 and 1988, the average monthly benefit awarded slightly less than doubled, as it grew from $255 per month to $505 per month. For those years, the average rate of growth was 6.5 percent annually. Over the past seven years, the average rate of growth was substantially less for average monthly benefits awarded (3.4 percent annually) and for the general rate of inflation (3.6 percent annually). 16 SOCIAL SECURITY COST-OF-LIVINGADJUSTMENTS AND PAYMENTS FOR 1977 THROUGH TABLE 2.1 * Projections as published in the President's "Budget of the United States Government, Fiscal Year 1991." SOURCE: U.S. Social Security Administration, 1990. PUBLIC AND PRIVATE PENSIONS. With respect to public and private pensions, considerably less information is available to describe changes over time. What is known about pensions indicates that less attention is given to keeping pace with regular inflation, let alone health cost inflation. Anecdotal data and older studies suggest that most private pensions do not have automatic cost-ofliving-adjustments. In fact, private pension adjustments that are made are often below regular inflation. |