Election Economics: Aging Challenges
If you lined up everyone in the United States by age, the middle person would be close to 37.1 years old. In 1850, the median age was 19, for 2000 close to 35 and by 2050, we expect that middle individual will be 41. Accelerated by baby boomers who started passing 65 last year, our population is aging.
How old we are makes a huge difference. Past a certain age, most of us are less creative, less productive and less healthy. In baseball, the average age of most MVPs has been just before age 30 and almost no one after 35. The “best” work from Nobel Prize winners tends to peak in their late 30s. For more typical occupations like office workers, managers, salesmen and saleswomen, one study indicated that productivity slips during people’s mid-40s.
What does it mean, then, for our society if the average age is climbing? One result is that 13% all government spending ( a huge proportion) is going to Medicare. Created in 1965, Medicare is medical insurance for everyone over 65, for disabled Americans and for end-stage kidney failure treatment. A healthcare network ranging from physicians to hospital bed rental companies is paid with Medicare money. On the other end, workers pay for most of Medicare with 2.9% of their paychecks (split 1.45/1.45 with employers). Additional funds come from income taxes, the Medicare trust fund and enrollee premiums.
According to the Trustees of the Medicare trust fund, the system is heading toward disaster. Depleted by 2024, the Medicare trust fund (created with surplus Medicare money when it existed) will no longer supplement any funding shortfall. Meanwhile, with so many baby boomers, there will be an insufficient revenue stream from Medicare payroll taxes. A second rarely mentioned consideration is that Medicare recipients have a very good deal. Estimated at a 3 to 1 ratio, the amount people receive from the system vastly exceeds what they paid during a lifetime.
Predictably, the Medicare challenge takes us to very different responses. President Obama refers to the projected cost savings of the Affordable Care Act (2010). By contrast, the Romney-Ryan team looks to vouchers that let program participants “spend” on care as they wish. Since both policies can easily be criticized, again it comes down to the approach you prefer…more or less government?
This post used facts and ideas from the Trustees Report on Medicare, a superb Teaching Company lecture (#13, Modern Economic Issues) from economist Robert Whaples and some of my median age data came from the CIA factbook. In addition, I do recommend playing with this interactive graph of median age changes from 1950 to 2050 and this excellent interactive graphic that displays medical spending categories and “who pays.”
And finally, one interesting fact– Demographers expect Japan to have a median age close to 55 in 2050. What would it mean to have half your population above 50?!
Election Economics Topics:
- A Healthcare Overview: 8/21
- Paul Ryan and economist Friedrich von Hayek: 8/13
- Unemployment: 8/6
- Minimum Wage: 7/30
- Dodd-Frank: 7/23
- Outsourcing: 7/16