A lot of older Americans died during the epidemic. I mentioned that one “benefit” of that would be some decline in projected spending by Social Security and Medicare. Not the most pleasant topic, but there is a real impact. A new paper looks at the potential effect on the Social Security program. The authors estimate that future retirement payments will decline by $219 billion and future disability payments by $6 billion. Negative impacts include, since some people died who were still working and contributing to the program, a reduction of $44 billion in future payroll taxes and increased payments to children and survivors of $25 billion. So the net reduction is $156 billion. Now if the long CV-19 nonsense continues we may see more people filing for and receiving disability benefits, so there may be a lower long-term net effect. Notwithstanding these savings, which represent a very small part of overall Social Security spending, (NBER Paper)
I posted this on National Review comments Monday, February 27, 2023 to a Jim Jim Geraghty column. It isn’t rocket science.
Every cloud no matter how dark has some silver lining. Early in the pandemic I read an article, which called the virus the “social security” flu that was going to trim the deadwood from the older, sicker, and fatter populations. I have Googled for it but cannot find it. My kids believe I imagined it.
That being said if we use the statistics for Minnesota, as a representative sample for the rest of the country, there is definitely a bright spot. The present statistics in Minnesota are that 86% of the deaths are in the 65 year old and older age groups. To expand to the total dead in the United States of 1.2 million, we see that probably one million have died nationally. Since these people are all collecting social security and it cost on average $15,000 a year to deliver benefits, we are saving in direct payments about $15 billion a year.
But that is not the big saving. The big savings are in long term care. 56% of the deaths are people in long term care (if Minnesota is representative) in the United States 670,000. In the United States it is reported that Medicare, Medicaid, and State Governments pay 53% of all long term care costs which run around $100,000 per year. Times the 670k long-term patients who have died we are talking around $35 billion a year so far.
While $50 billion a year Covid savings are a rounding error on our social welfare spending, it would be welcome in infrastructure spending and other priorities. It is not going to stop it is going to keep giving. Like prostate cancer in men, if you live long enough Covid is going to kill you. Just a thought to cheer up your day.
Free to choose – I am going to quibble slightly with your math.
I ran the numbers for the social security savings using $40k as the average annual social security benefit (that number may be high since the average benefit with my client base is around 50k. I did a weighted average life span based on the approximate age of death and the resulting lost benefit from dying early. I got savings ranging between 200b and 300b based on age weighting, so the $219b seemed reasonable. The people running the those numbers had access to better numbers than I had (back of the napkin was my calculation).
The savings from long term care are probably significantly less than your calculation. the average life expectancy of a male entering long term care is around 6 months and 9 months for a female. (Kevin correct me if my memory is wrong ). There is probably some savings in long term care cost for 2022/2023/2024, since that demographic subset of the population had high death rate from covid (that subset bing 75+/80+). Whereas the death rate less than age 75 was much lower, resulting in a much smaller decrease in the population likely to enter long term care in the near term and long term future.