(How) Is Aging a Health Policy Problem?

Abstract

During the 1990s, the claim that an aging population constituted a long-term "crisis" became a policy cliché. This assertion became particularly popular among elite journalists and academics in the United States. For example, Washington Post columnist David Broder wrote of "the fiscal calamity that the retirement of the baby-boom generation poses for the early years of the next century." Former Director of the Congressional Budget Office (and current President of the Urban Institute) Robert Reischauer referred to "the demographic tsunami of the baby boom's retirement. Moreover, the Congressional Budget Office and U.S. General Accounting Office began issuing reports projecting the date of economic doomsday caused by spiraling deficits that would be caused, in turn, by burgeoning pension and health care costs. Because Medicare costs have grown far more quickly than Social Security obligations - though the latter will still remain larger than the former for many years - and because a significant portion of Medicaid spending also covers the elderly, much of this commentary has focused on health care costs in particular. Eminent health economist Victor Fuchs wrote that health care costs for the elderly "could plunge the nation into a severe economic and social crisis within two decades. Former Colorado Governor Richard D. Lamm wrote of "the moral imperative of limiting elderly health entitlements," claiming that program costs would otherwise impoverish the young. Jeremiads about the challenges of aging in general, and of paying for the health care costs of the elderly in particular, have been especially loud in the United States, where they have dovetailed conveniently with an underlying ideological campaign to cut government programs. However, these demographic trends and budgetary pressures exist in all countries, and so this concern is heard around the world. Indeed, it has become a common theme in the international policy community. The World Bank, for example, has promoted this view of imminent crisis through its study Averting the Old Age Crisis and subsequent publications and conferences. These worries regarding cost and inequity are based on plausible inferences. As people age, they tend to have higher medical expenses. Thus, if a larger portion of the population consists of older people,, one might expect higher medical spending. In turn, pressure for higher spending poses issues of policy - how to pay, whether to pay - and ethics the moral basis for providing or withholding benefits. Yet, I will argue that, as a matter of both policy and ethics, policymakers and citizens need not worry about the implications of aging for medical costs. Aging of the population has some effect on health costs, but a much smaller effect than those factors that are both more susceptible to manipulation and pose less difficult ethical dilemmas. The aging of the population does pose economic and budgetary challenges, but the contribution of health care costs to this equation is relatively minor; policymakers would do better to focus on other concerns such as pension expenses and participation in the workforce. For these reasons; the health care costs of an aging population do not justify changes in health policy that would not otherwise be appropriate.