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C. LONG-TERM FINANCING

THE LONG-TERM GROWTH IN FEDERAL SPENDING WILL BE FOCUSED ON HEALTH CARE COSTS

Today, rising health care costs rather than spending for retirement income, are the greatest source of the increase in public spending on the elderly (table 6-2).

Social Security retirement and disability benefits, which grew from 2.5 percent of GNP in 1965 to 5.2 percent in 1983, are projected to decline to 4.2 percent by 2005, and then increase slightly to 5.7 percent by 2030.2 Other pension benefits paid from the Federal budget are expected to decline from 2 percent of GNP currently to about 1.2 percent of GNP by 2030.2

TABLE 6-2.-FEDERAL PENSION AND HEALTH PROGRAMS AS A PERCENTAGE OF GNP AND THE BUDGET: 1965 to 2040

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1 Estimates for 1984 to 1988 are based on CBO baseline assumptions (August 1983); forecasts for 1990 and beyond are based on intermediate assumptions of the Social Security and Medicare actuaries.

2 Forecasts for 1990 and beyond are based on the assumption that the Budget accounts for 24 percent of GNP.

3 The discontinuity in the estimates of pension and health benefits as a percent of GNP between 1986 and 1990 is due to the Social Security trustees assuming that OASDI will grow at a faster rate than CBO in the late 1980's and the Health Insurance trustees assuming that Medicare will grow at a slower rate than CBO assumes.

Source: John L. Palmer and Barbara B. Torrey, "Health Care Financing and Pension Programs," prepared for the Urban Institute Conference on "Federal Budget Policy in the 1980s," Sept. 29 and 30, 1983.

On the other hand, health care costs will continue to grow steadily; in 1970, Medicare and other Federal health programs accounted for only 1.6 percent of GNP, but by 1986 Federal health spending had risen to 2.9 percent of GNP. With no change in current law, Federal expenditures on health are projected to increase to more than 6 percent of GNP by 2030. In short, if health care costs are not brought under control, Federal spending on health care will equal, or even surpass, Federal spending on retirement income within the next 50 years.

2 Palmer, John L. and Torrey, Barbara B. Health Care Financing and Pension Programs, Sept. 29 and 30, 1983.

Overall, the share of the Federal budget going to the elderly is expected to remain fairly stable for the next two decades, as declines in the share for retirement income spending offset increases in health spending. Only then should overall spending on the elderly rise as a proportion of the budget, and then only if health costs have been allowed to rise unchecked in the interim.

Chapter 7

INTERNATIONAL COMPARISONS

The phenomenon of an aging society is not unique to the United States. With worldwide advances in medical care and population control, many nations around the world face the prospect of an increasingly older population. This worldwide aging trend raises concerns about the ability of the world as a whole to provide for the health and income needs of a population that lives longer in retirement.

Often in the debate over the future of aging policy in this country, public officials lose sight of the similarities between our problems and those faced by our neighbors around the world. Yet in many ways, the changes that will occur in this country are mild by comparison to those that must occur in developing nations and even in other developed countries. This chapter presents some of the scant international data on aging trends to provide a basis for placing our experience in the United States in the context of the worldwide aging trend. The countries selected for comparison are a cross-section of European and non-European developed countries and developing countries from various continents.1

A. AGE DISTRIBUTION

THE UNITED STATES HAS THE THIRD LARGEST ELDERLY POPULATION (AGE 65 PLUS) AND THE LARGEST "OLD-OLD" POPULATION (AGE 80 PLUS) IN THE WORLD

The 1985 U.S. population of 28.6 million persons age 65 and older is the third largest in the world after China and India. The 1985 U.S. population of 6.2 million persons 80 and older is the largest in the world, with 100,000 more people in this age group than China.

1 Data for this chapter is from U.S. Bureau of the Census An Aging World, 1986, and was provided to the Committee in advance of publication by Barbara Boyle Torrey.

Age 65 plus:

China..

India...

United States.

Soviet Union...

Japan.

West Germany

United Kingdom.

Italy.

France.

Indonesia.

Brazil

Age 80 plus:

United States

China....

Soviet Union...

India....

Japan.

West Germany

France......

United Kingdom...

Italy.

TABLE 7-1.-NATIONS RANKED BY SIZE OF ELDERLY POPULATION

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Source: U.S. Census Bureau. An Aging World, 1986.

SWEDEN HAS THE OLDEST POPULATION IN THE WORLD. THE PROPORTION OF ELDERLY IN THE U.S. POPULATION IS IN THE MIDDLE RANGE OF DEVELOPED NATIONS-SMALLER THAN EUROPEAN COUNTRIES BUT GREATER THAN NON-EUROPEAN DEVELOPED COUNTRIES Sweden currently has the oldest population in the world with 16.9 percent over age 65. The elderly population in other Western European countries ranges between 12 and 15 percent of the total population. While only 12 percent of the U.S. population is 65 and older, this is a larger percentage than in both Canada and Japan.

TABLE 7-2.-ELDERLY POPULATION BY NATION, 1985-2025

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