extended-care facility) and drugs. At least half of all nursing home patients, for example, are aged 80 or older (in comparison to a median age of about 73 for the whole population 65 and older). A recent survey of nursing home patients found this age distribution: 12 percent, under age 65; 18 percent, aged 65-74; 41 percent, aged 75-84; and 29 percent, 85 and older (National Center for Health Statistics, Series 12, No. 2).

The increase in drug costs with advanced age is apparent from the following: aged persons who were unable to carry on any major activity (24 percent of those aged 75 and over in contrast to 10 percent of those aged 65-74) needed 21.7 prescriptions per year on the average at an annual cost of $88.97.

(d) Because Medicare requires that the individual meet half the cost of Part B by means of a premium payment (as well as paying the deductibles and co-insurance), the inflation of medical prices constantly adds to the problems encountered by the low income aged person in paying his own way. This situation will exist as long as the financing of Part B is geared to monthly premiums paid by the aged beneficiary rather than on a payroll tax spread over the rising earnings of the working population. These facts have resulted in a problem that is basic to the economic security of the elderly population: Despite the important protection now provided by Medicare, increasing numbers of older people may have to pay ever larger amounts out-of-pocket to get the medical care they need. More may have to resort to the uncertain and uneven protection provided by State Welfare programs (Medicaid).

(4) Inflation erodes already inadequate retirement incomes, and this erosion continues over a longer retirement period.

While economists may disagree over the accuracy of present price indicators and over the causes and controls of inflation, there can be no disagreement as to the impact that real price increases have on fixed value assets and on fixed income sources not subject to adjustment; even an annual rise of only 2 percent will reduce purchasing power by 18 percent after one decade and by 33 percent after two decades.

The impact of inflation on retired persons will vary, depending in large part on the kinds of assets held and on the sources of income. But age has deprived most older people of the best weapon for fighting inflation-employment and participation in rising earnings levels. For the aged group as a whole, the distribution of the aggregate income of the aged-discussed above provides a clue to the overall impact of price rises. This impact has been described as follows:

Based on an estimated 1968 annual purchasing power of over $40 billion among persons past 65, a 4-percent inflation would produce purchasing power loss to these citizens of roughly $1.6 billion per year. A 5-percent inflation would cost them over $2 billion per year. (Minority Views, p. 157 of Developments in Aging, 1967, U.S. Senate Special Committee on Aging.)

Without minimizing the seriousness of the threat of inflation to retirement incomes, the following facts must also be recognized:

(a) Earnings, which usually more than keep pace with a rise in living costs, constitute the largest single source of income for the population 65 and older-about a third of the $40-$45 billion aggregate estimated for 1968. If earnings are subtracted from the aggregate, the "vulnerable" portion becomes less than $30 billion. The potential purchasing power loss then becomes $1.2 billion per year with a 4-percent inflation rate and $1.5 billion with a 5-per

cent rate.

(b) The proportion of the aggregate income of the older population that comes from Social Security is fast catching up with the share from earnings 30 percent at the time of the Social Security survey. Through past legislative enactments, the benefits have been adjusted sooner or later, to more than correct for the rise in cost of living for most beneficiaries (table 10). That for some the increase has been too little, as well as too late, is apparent from Chart D.

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PART FOUR

OUTLOOK FOR FUTURE GENERATIONS OF THE AGED

Identified here are major trends some well established, others developing-that are important in evaluating the outlook for the future.

Given present trends, inadequate income will still be a problem plaguing future generations of aged people.

Poverty of the aged will NOT disappear. The existing pension system-public and private can be expected to produce a sizeable shift upward in the distribution of penson income for aged persons. But this shift will still leave a majority with pension incomes that are below any reasonable level of adequacy.

5

A recent simulation projection of income in old age concludes that in 1980 about half the couples and more than three-fourths of the unmarried retirees will receive $3,000 or less in annual pension income, both public and private; 86 percent of the unmarried aged could expect to receive less than $2,000. Three-fourths of the couples would receive pension incomes of $4,000 or less and only one in eight would have more than $5,000 (Chart H and table 11).

TABLE 11.-Projected Total Pension Income Distribution for Retired Couples and Unmarried Individuals, 19801

Pension income includes benefits from Social Security, private pensions (including State and local plans), and Federal retirement programs.

• Includes units without pensions. Less than 1 percent.

Note.-Totals may not sum to 100 percent due to rounding.

Source: Social Security Administration Research Report No. 24; 1968, table 9, p. 64.

First findings of the Simulation Projection are reported in "The Economic Status of the Retired Aged in 1980: Simulation Projections," by James H. Schulz, Research Report No. 24 of the Social Security Administration, U.S. Department of Health, Education, and Welfare, January 1968. Other findings used in the Task Force Report appear in the U.S. Joint Economic Committee Compendium.

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