GAO Long Term Care Study
Before focusing on the increased burden that long-term care will place on federal and state budgets, it is important to look at the broader budgetary context. As we look ahead we face an unprecedented demographic challenge with the aging of the baby boom generation. As the share of the population 65 and over climbs, federal spending on the elderly will absorb a larger and ultimately unsustainable share of the federal budget and economic resources. Federal spending for Medicaid, Medicare, and Social Security is expected to surge—nearly doubling by 2035—as people live longer and spend more time in retirement. In addition, advances in medical technology are likely to keep pushing up the cost of health care.
Moreover, the baby boomers will be followed by relatively fewer workers to support them in retirement, prompting a relatively smaller employment base from which to finance these higher costs. Based on CBO’s long-term Medicaid estimates, the federal share of Medicaid as a percent of GDP will grow from today’s 1.5 percent to 2.6 percent in 2035 and reach 4.8 percent in 2080. Under the 2005 Medicare trustees’ intermediate estimates, Medicare will almost triple as a share of gross domestic product (GDP) between now and 2035 (from 2.7 percent to 7.5 percent) and reach 13.8 percent of GDP in 2080. Under the Social Security trustees’ intermediate estimates, Social Security spending will grow as a share of GDP from 4.3 percent today to 6.3 percent in 2035, reaching 6.4 percent in 2080. (See fig. 2.) Combined, in 2080 almost one-quarter of GDP will be devoted to federal spending for these three programs alone.