One of the economic and social challenges facing the USA in the next couple of decades is the potential collapse of its old age and medical insurance schemes. According to the US Census Bureau’s 2017 National Population Projections, 2030 will be the year that all of the Baby Boomers will reach the retirement age of 65. This means that in 11 years’ time 1 out of every 5 US citizens will be of retirement age. And by 2035 it is predicted that the number of those aged 65 and older will exceed those under the age of 18: 78 and 76.7 million respectively. The median age of the US population will also rise: from 38 years today to 43 by 2060.
This will have large flow on costs for health expenditure: currently those aged 65 years and older make up 15 per cent of the US population account and yet account for over a third (34 per cent) of all healthcare spending. This proportion of healthcare spending will presumably grow with the rise in the elderly population. And overall national health expenditures are expected to also rise in the next few years. In 2016 the proportion of GDP devoted to national health expenditures climbed past 15 per cent. According to the US Census Bureau and the Centers for Medicare and Medicaid Services, by 2020 the total amount spent on health will hit USD4 trillion, it will climb to USD5 trillion in 2025 and by 2027 it will hit USD6 trillion. By that date (eight years’ away) the proportion of GDP being devoted to health costs will have risen to 19.4 per cent. The ageing population will also naturally lead to an increase in the US home care market: it is expected to grow from USD100 billion in 2016 to USD225 billion in 2024. At the same time, the greater number of patients will further exacerbate the healthcare provider labour shortage. The consulting firm Mercer estimates that by 2025 US healthcare providers will face a collective shortage of about 500,000 home health aides, 100,000 nursing assistants and 29,000 nurse practitioners.
And yet the ability to pay for these rising costs will decrease over the same time period. In 2020 there will be 3.5 working-aged adults for every retirement-aged person; but by 2060 that ratio will have declined to 2.5:1. Rising costs and fewer taxpaying workers means that not only healthcare will become increasingly unaffordable. The Social Security program will start to pay out more than it takes in next year. This transition has been anticipated for some time, but whether the program has been adequately future-proofed is doubtful. In fact, Forbes has predicted that Social Security will have insufficient funds to pay out promised benefits by the mid-to late 2030s. Or in about 16 years’ time. These are not far-off events that are being forecast, we are talking about a timeframe of 10-20 years. Most of us will live to see how future US governments will cover the funding gap in medical and pension schemes. Will taxes go up? Will entitlements go down? How will the US public take these changes? And who in Washington DC is currently concerned about these forecasts and trying to do something about it? Or is the prevailing feeling: “let us eat and drink, for tomorrow we die”? If so, we are in for some interesting times in the next couple of decades.
Marcus Roberts is co-editor of Demography is Destiny, MercatorNet's blog on population issues.