GAO Long Term Care Study
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today as you discuss the anticipated growing demand and associated costs for long-term care services, which will be driven largely by the aging baby boom generation, and the challenges that increased demand will bring for federal and state budgets. Earlier this year, we issued a report entitled 21st Century Challenges: Reexamining the Base of the Federal Government to provide policymakers with a comprehensive compendium of those areas throughout government that could be considered ripe for reexamination and review based on our past work and institutional knowledge.1 In that report, we presented illustrative questions for policymakers to consider as they carry out their responsibilities. These questions examined major areas of the budget and federal operations including discretionary and mandatory spending, and tax policies and programs. One prominent question that we raised in that report and that will be the focus of my comments today is “What options are there for rethinking the federal, state, and private insurance roles in financing long-term care?”
In general, the aging of the baby boom generation will lead to a sharp growth in federal entitlement spending that, absent meaningful reforms, will represent an unsustainable burden on future generations. As the estimated 76 million baby boomers born between 1946 and 1964 become elderly, Medicare, Medicaid, and Social Security will nearly double as a share of the economy by 2035. We have been able to sustain these entitlements in the past with low depression-era birth rates and a large postwar workforce. However, absent substantive reform of entitlement programs, a rapid escalation of federal spending for Social Security, Medicare, and Medicaid is virtually certain to overwhelm the rest of the federal budget.
Most attention has been focused on the need for Social Security and Medicare reform in order to maintain their viability and ability to meet programmatic commitments. By 2017, Social Security’s cash income (tax revenue) is projected to fall below program expenses. At that time, Social Security will join Medicare’s Hospital Insurance Trust Fund, whose outlays exceeded cash revenues in 2004, as having a cash flow deficit. While these are important issues, a broader focus should also include
1GAO, 21st Century Challenges: Reexamining the Base of the Federal Government, GAO-05-325SP (Washington, D.C.: February 2005).