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FIGURE 2.2 TRENDS IN ELDERLY MEAN AND
MEDIAN INCOME FOR 1977 THROUGH 1988.

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Though growth in median income for those aged 70 and above has been similar to growth in mean income for those aged 65 and above, three problems are indicated for the future. First is the fact that one-half of older elderly

about fourteen and one-half million people have incomes under $8,557 per year, leaving them very little margin when it comes to health and long term care costs. Secondly, the primary reason this level has gone up is because a slightly wealthier cohort of elderly have moved into this age group. The next cohorts are unlikely to be as well off. Third, even if these people are better off coming into their 70s, they are likely to live another decade and consistently be losing ground as their incomes fail to keep pace with overall inflation and health and long term care cost inflation.

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TABLE 2.2 – INCOME OF ELDERLY PERSONS FOR 1977 THROUGH 1988.

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ELDERLY MEAN INCOME. Another view is provided by examining mean (or average) income per person aged 65 and older, a figure that has increased steadily in recent decades and reached $13,131 in 1988, as compared to $5,855 in 1977. (See Figure 2.2 and Table 2.2) Over the period between 1977 and 1988, elderly mean income rose at an average annual rate of 7.7 percent -- about a one and one-half percent higher rate than for Social Security increases and overall inflation. As has been the case with Social Security and overall inflation, the rate of increase has slowed in recent years. Over the most recent fouryear period (1985-1988), the annual rate of increase in mean elderly income averaged 4.2 percent just slightly higher than the 3.6 percent for overall inflation.

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ELDERLY MEAN INCOME AS COMPARED TO PHYSICIAN MEAN INCOME. While elderly mean income has experienced some growth in the 1980s, mean incomes for physicians, a primary source of health care for older Americans, has grown much faster. Starting from a level of $89,900 in 1981, average physician net annual income rose to $144,700 in 1988. (See Table 2.3 and Figure 2.3) During the same period, elderly mean annual income went from a level of $8,738 in 1981 to $13,131 in 1988 and is only one-eleventh the level of physician net income. Over the seven year period (1981-88), average net physician income, for all physicians combined, increased by 61 percent. Three physician specialties (surgery, radiology, anesthesiology) grew at even higher rates ranging from 69 to 81 percent for the 1981-88 period. General and family practice physicians only increased 32 percent over thi period. As a group, the surgeons were among the fastest growing and were the highest paid, reaching a 1988 average net income of $207,500.

TABLE 2.3 PHYSICIAN MEAN NET INCOME AND ELDERLY MEAN INCOME FOR 1981 THROUGH 1988.

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SOURCE: Bureau of the Census, 1990; and "Socioeconomic Characteristics of Medical Practice 1989," AMA, 1990.

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FIGURE 2.3 TRENDS IN PHYSICIAN MEAN NET
INCOME AND ELDERLY MEAN INCOME FOR 1981
THROUGH 1988.

Elderly and Physician Mean Income

Comparison for 1981 through 1988

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ELDERLY LOSING GROUND AS HEALTH CARE COSTS ABSORB HIGHER PERCENTAGE OF THEIR INCOME

What the previous data suggest is that it is true that the elderly today, on average, are somewhat better off in terms of income than previous generations of elderly. However, the same data suggest large number of elderly are still in deep trouble, including older women and racial and ethnic minorities. The data also suggest that the retirees of the 21st century, on average, will not be better off. Any advantage that the elderly may have by entering retirement with higher incomes than a decade ago will quickly be lost as health and long term care costs absorb ever larger proportions of that income.

Measured against a number of indicators of income, health and long term care costs are, on average, absorbing ever larger percentages of elderly income. For elderly persons entering retirement in any given year, they face a continual erosion of their income as health care costs rise more than one and one-half times faster than their income.

ELDERLY OUT-OP-POCKET HEALTH COSTS AS COMPARED TO ELDERLY MEAN INCOME. As described earlier, the House Committee on Aging analyzed out-of-pocket costs for selected years from 1977 to 1988. The results of that analysis show that elderly out-of-pocket costs have risen from 12.3 percent of elderly income in 1977 to 18.2 percent of income in 1988. (See Figure 3.1 and Table 3.1) The 1988 level is also substantially higher than the 15 percent level in 1966, the year the Medicare and Medicaid programs began. All indications are that this trend of costs outpacing income will continue into the foreseeable future and that health costs are likely to reach 20 percent of elderly income by the early 1990s.

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