The Medicare and Medicaid populations will be the two biggest sources of health spending growth in future years and since they are largely publicly funded, will present a huge challenge to federal and state budgets. The overall life situation a person can play a key role in their health status and consequent medical service needs. Research in the Forum for Health Economics and Policy explores the health spending implications of trends in the Medicare population. (FEHP Article) Programs like Medicare and Social Security, and to some extend Medicaid, have greatly improved the financial circumstances of the elderly, which may itself aid in maintaining better health. Even in the early 1960s, the post-65 population had the highest rate of poverty among age cohorts, but now they have the lowest, less than 10%. The cash income position of the elderly has also improved significantly, with households headed by a person over 65 gaining much more cash income, on average, than other age cohorts. This partly due to the income transfers represented by Social Security but also to investment income from lifetime savings in this group. The greatest gains have been seen by those who were relatively well-off within their age cohort, but there is less income inequality in older cohorts than pre-65 ones.
Another factor in the increasing income of older people is later retirement ages; many people are working past age 60 and age 65. And more so than in the past, older workers are paid nearly the same as younger workers. On the other hand, private pensions are now less widespread and tend to have lower benefits than they once did. The higher incomes of the current post-65 group are correlated with greater educational attainment than for previous cohorts. Other factors affecting health include greater prevalence of insurance coverage–almost every post-65 has Medicare and rising health expectancy, which reflects generally better health status and better health services. Life expectancy has increased more among the relatively well off. Reasons for concern about the staying power of the improved financial position of the elderly include the current unsustainability of some of the programs they depend upon, including Medicare and Social Security. If these programs are less able to provide the same level of benefit in the future, it is possible that reduced financial security may affect the health of beneficiaries. So far, our politicians have been incapable of producing realistic long-term solutions to this problem.