Half Of All Seniors' Consumption May Soon Be Health Care


Health Care Already Accounts for Half of Today's Oldest Seniors' Consumption, Says NCPA Study

DALLAS (February 20, 2007) - In less than two decades, half of everything seniors consume may be health care, according to a new study by the National Center for Policy Analysis (NCPA).  For today's oldest seniors, this has already happened.

"For the oldest seniors health care spending is higher than spending on housing, food, savings and taxes combined," said Andrew Rettenmaier, executive associate director of the Private Enterprise Research Center at Texas A&M University and an NCPA Senior Fellow who co-authored the report.  "However, most of the money spent on seniors' health care comes from sources other than their own. In addition to out-of-pocket spending and premium payments, seniors' medical expenses are paid by Medicare, Medicaid and former employer health plans." 

The study notes that total health care spending on the elderly - including both out-of-pocket spending by seniors and third-party expenditures - will constitute a growing portion of seniors' "total potential consumption."  "Total potential consumption" includes everything seniors can consume: all their personal income plus all health care expenditures by third parties net of premium payments.

  • Health care today makes up about two-of-every-five dollars of seniors' total potential consumption - 43 percent.
  • In just 17 years (by 2024), health care will equal 50 percent of seniors' total consumption.
  • For the oldest seniors - age 75 and older - health care already makes up more than half of all they consume.

Since Social Security represents such a large portion of seniors' retirement income - particularly for older seniors - examining health spending as a percentage of Social Security benefits is also informative:

  • Today's seniors spend an amount equal to 44.5 percent of their Social Security benefits on health care. 
  • The amount will rise to 60.9 percent by 2030 and to 81.3 percent by mid-century.
  •  By 2070, almost all (93.4 percent) of seniors' Social Security checks will be dedicated to spending on health and medical care.

"Current workers should plan on rising high health care costs during retirement," said Rettenmaier.  "Boomers might want to work longer or save more to prepare for the anticipated medical bills."

At almost 17 percent of GDP, the U.S. is spending more of its income on health care than any other country.  Some wonder how high health care spending can go.  "Based on the current projections, health care's percentage of GDP will almost double in the next 35 years."