The Rising Burden of Health Spending on Seniors

Studies | Health

No. 297
Thursday, February 01, 2007
by Liqun Liu, Andrew J. Rettenmaier and Zijun Wang


Conclusion

Increasing life expectancies, rising spending per retiree and a growing retired population are fueling higher health care expenditures for the elderly population.  The health care cost borne by retirees is projected to rise substantially, even under current-law projections.  If the cost sharing shifts and seniors are asked to pay more of their own health care costs, health care will crowd out other spending options for future retirees.  Current workers must anticipate these changes, and will have to consider staying in the workforce longer, saving more or consuming less health care as the relative price of health care increases.

“Current workers will have to consider working longer, saving more or consuming less health care in retirement.”

The rising costs of medical care - and the growing portion of seniors' incomes dedicated to health care - will prompt policymakers to consider ways to reduce the burden of health spending on behalf of and by seniors.  One way to lessen the burden is to encourage workers to save money today for their own elderly health care by allowing them to prepay part of their Medicare benefits, or by expanding Health Savings Accounts (HSAs) and allowing Medicare-eligible seniors to open and make deposits to HSAs to cover out-of-pocket health expenses.

NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.


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