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Black Friday for America’s Senior Citizens

Small Increase in Social Security, Giant Jump in Medicare Costs

By Tucker Sutherland

Senior Journal, October 18, 2002

 This may be remembered as “Black Friday” for America’s senior citizens. It is a day that clearly signals the financial woes ahead for those heavily dependent on Social Security and Medicare. On this day, the Bush Administration announced the smallest increase in Social Security payments in years and large increases in Medicare costs. Social Security payments in 2003 will go up only 1.4 percent, while the deductible for Medicare Part A increases 3.5 percent and the premium for Part B jumps by 8.7%.

The bottom line is a $7.00 per month increase in net cash for a typical Social Security recipient that is also covered by Medicare Part A and B. The math is a $13.00 per month increase in Social Security and an average monthly increase in Medicare costs of  $7.00 per month. That $7.00 increase will, for most seniors, be more than consumed by increases in prescription drug costs and other medical costs not covered by Medicare.

“Since 1995, prescription drugs have been the most rapidly growing component of health care costs. By 1999, drugs were the most important contributor to overall cost growth, with the rate of growth in drug spending per person reaching more than 18 percent, according to Paul B. Ginsburg, Ph.D., President, Center for Studying Health System Change. “Since then, the rate of growth has slowed somewhat, but it is still in the mid-teens.” Ginsburg made these statements in June, when testifying before a congressional committee.

But, senior citizens are still receiving no financial help from the federal government with prescription drugs. Too many just go without.

Senator Jean Carnahan (MO), member of the Senate Committee on Aging, said, “Medicare, the Federal program that provides health insurance for some 40 million elderly and disabled Americans, does not include a prescription drug benefit. While it may not have been a necessary component of Medicare when the program was first created back in 1965, it is certainly unacceptable not to have it today. Prescription drugs save lives, and they improve the quality of life for millions of Americans. But when medication is unaffordable, we fail our sick and elderly. And when those in need have to choose between buying food or paying for a prescription drug, we are failing our seniors. And when older adults have to rely on family members to pay their drug bills, we fail both seniors and their families.”

What makes today so critical is not the short-term consequences but the clear signal of a trend that forebodes a bleak future for America’s elderly population, which is growing rapidly and will boom as the boomers – now still 10 years away from Social Security -  roll into this upper age bracket.

But it is not the aging of America that is driving healthcare costs, according to Ginsburg. He said, “Many analysts believe that the aging of the American population is an important driver of health care costs. We have been analyzing this and find that while a driver, aging is a relatively small one. Using data on health care spending per capita by people of different ages and data on the changing age distribution of the population, preliminary estimates suggest that at this time, aging of the working-age population contributes about 0.7 percentage points to the cost trend. Viewed in relation to the 2001 cost increase of almost 9 percent, aging is a relatively small driver. Per capita spending rises sharply around age 55, and the leading edge of the baby boom generation is now reaching this age.”

Increasing health care costs, increasing Medicare costs and slow growth in Social Security benefits means more and more senior citizens will be driven to the Medicaid rolls, where the government (state and federal) must pay all the cost.

But, even this safety net, has holes. The most recent trends have been growing numbers of healthcare providers refusing to take Medicaid (and sometimes, Medicare) patients, because the rates of pay from government are too low. While at the same time, many states are struggling in this stagnant economy to meet their Medicaid obligations.

Ginsburg noted in his testimony, “Rising health care costs also pose a problem for the federal and state governments, which finance 45 percent of national health expenditures, mostly through Medicare and Medicaid. With public revenues staying at a relatively constant percentage of national income, growth in outlays for these programs in excess of growth in income that is taxed poses particular strains on public budgets. States are facing these strains now in an acute manner, as Medicaid outlay growth exceeds the trend in state revenues by a large margin. The strain will become acute for the federal government when the baby boom generation begins to become eligible for Medicare.”

The helpless victims are the elderly. There is really nothing they can do but endure the situation. For some, it is perhaps their fault for not better preparing for their retirements, but the reality is that inflation accelerated in their late productive years, while their earning capacity stagnated due to age. And, too, few envisioned living so long.

Between 1950 and 2000, the U.S. population 65 and over increased by 64.4 percent. Faster than any other age group. That population grew to almost 35 million people and almost 13 percent of our total population. The increases ahead will be even greater.

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