NCPA - National Center for Policy Analysis


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).

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," says Andrew J. Rettenmaier, a co-author of the study.  "Boomers might want to work longer or save more to prepare for the anticipated medical bills."

At almost 17 percent of gross domestic product (GDP), the United States spends 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.

Source: Liqun Liu, Andrew J. Rettenmaier and Zijun Wang, "The Rising Burden of Health Spending on Seniors," National Center for Policy Analysis, Policy Report No. 297, February 20, 2007.

For study text:


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