Working Paper: NBER ID: w1269
Authors: Victor R. Fuchs
Abstract: The Medicare trust funds face huge prospective deficits by the end of this decade.This paper discusses trends in six areas that bear on the Medicare problem: the number of the elderly, their health status, use of medical care, labor force participation, income, and living arrangements. Among the most important findings are: 1) a very large increase since 1965 in life expectancy at age 65; 2) a very large increase since 1976 in real per capita health care expenditures on the elderly relative to expenditures on persons under age 65; 3) a cross-sectional increase with age in per capita health care expenditures that is primarily attributable to very large expenditures in the last year of life; 4) a sharp decrease in labor force participation and a sharp increase in relative income of the elderly since 1965.The paper concludes by raising questions about the need to reconsider the definition of the elderly, the need for more flexible labor market arrangements for older workers, and a need for a social consensus concerning appropriate care of dying patients.
Keywords: Aging; Health Economics; Medicare; Elderly; Health Care Expenditures
JEL Codes: I11; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increase in life expectancy at age 65 (I14) | Improvements in health status (I14) |
| Increase in life expectancy at age 65 (I14) | Decrease in mortality rates (I14) |
| Improvements in health status (I14) | Decrease in mortality rates (I14) |
| Rise in per capita health care expenditures for the elderly (H51) | Higher costs incurred by the elderly (J14) |
| Age (J14) | Health care utilization (I11) |
| Decline in labor force participation among older men (J26) | Improved social security benefits (H55) |
| Improved social security benefits (H55) | Influence on retirement decisions (J26) |
| Increase in the number of elderly living alone (J14) | Rising incomes (F61) |
| Rising incomes (F61) | Changing social dynamics (Z13) |