The Burden Of Entitlement Programs on the Future Funding of Health Care

Kevin R. Loughlin, MD, MBA
Published: Thursday, Jun 05, 2014
Kevin R. Loughlin, MD, MBA,from Harvard

Kevin R. Loughlin, MD, MBA

Our country is facing present and future fiscal challenges that have never been encountered before in our nation’s history. Our major entitlement programs are not new. The Social Security bill was passed in 1935 and Medicare was established in 1965. However, in the ensuing decades, the entitlement programs have grown far beyond what anyone could have imagined at the time of their inception. Let’s analyze the current status of the three major entitlement programs—Social Security, Medicare, and Medicaid—their future growth, and how that will impact the funding of health care.

Social Security

Fundamental to the financial problems faced by the Social Security Administration is the aging of the baby boomers, which has dramatically altered the worker-to-retiree ratio. Table 1 summarizes the trend of workers to beneficiaries over the years.1 As can be seen, the number of workers supporting a beneficiary has decreased from 159.4 to 2.9 in the past 70 years. It is projected to decrease even further to 2.1 by 2030.

Medicare

Similar to Social Security, Medicare costs and enrollment increase as the population ages. The number of people enrolled in Medicare is expected to increase from 47 million in 2010 to 80 million by 2030. Total Medicare spending is projected to increase from $523 billion in 2010 to $932 billion in 2020.2 The Congressional Budget Office (CBO) has written that “future growth in spending per beneficiary for Medicare and Medicaid— the federal government’s major health care programs—will be the most important determinant of long-term trends in federal spending.”

Table 1. Ratio of Social Security-Covered Workers to Beneficiaries

Year Ratio
1940 159.4
1945 41.9
1950 16.5
1955 8.6
1960 5.1
1965 4.0
1970 3.7
1975 3.2
1980 3.2
1985 3.3
1990 3.4
1995 3.3
2000 3.4
2005 3.3
2010 2.9

Medicaid

President Johnson signed the Medicaid program into law on July 30, 1965. Started as a health coverage program for welfare recipients, it has evolved into a public health insurance program for America’s low-income population, and is also the primary program that provides long-term care to the elderly and people with disabilities.3

Total Medicaid outlays in fiscal year 2011 were $432.4 billion, with $275.1 billion, or 64%, representing federal spending and $157.3, or 36%, representing state spending. Medicaid provided healthcare services to an average of 55.7 million people in 2011. About one of every five Americans, or 70.4 million people, were enrolled in Medicaid for at least 1 month in 2011.4 Medicaid enrollment grew by 3.8% between 2010 and 2011.


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