GAO Long Term Care Study
As the baby boom generation retires and the Medicare-eligible population swells, the imbalance between outlays and revenues will increase dramatically. Medicare growth rates reflect not only a rapidly increasing beneficiary population, but also the escalation of health care costs at rates well exceeding general rates of inflation. While advances in science and technology have greatly expanded the capabilities of medical science, disproportionate increases in the use of health services have been fueled by the lack of effective means to channel patients into consuming, and providers into offering, only appropriate services. In fiscal year 2004, Medicare spending grew by 8.5 percent and is up 9.9 percent for the first 6 months of fiscal year 2005.10 The implementation of the Medicare outpatient drug benefit in January 2006 will further increase Medicare spending in future years.
To obtain a more complete picture of the future health care entitlement burden, especially as it relates to long-term care, we must also acknowledge and discuss the important role of Medicaid. In 2003, approximately 69 percent of all Medicaid dollars was dedicated to services for the elderly and people with disabilities. Medicaid is the second largest and fastest growing item in overall state spending. At the February 2005 National Governors Association meeting, governors reported that states are faced with proposing cuts in their Medicaid programs. Over the longer term, the increase in the number of elderly will add considerably to the strain on federal and state budgets as governments struggle to finance increased Medicaid spending. In addition, this strain on state Medicaid budgets may be exacerbated by fluctuations in the business cycle. State revenues decline during economic downturns, while the needs of the disabled for assistance remain constant.
In coming decades, the sheer number of aging baby boomers will swell the number of elderly with disabilities and the need for services. These overwhelming numbers offset the slight reductions in the prevalence of disability among the elderly reported in recent years. In 2000, individuals aged 65 or older numbered 35.1 million people—12.4 percent of our nation’s total population. By 2020, that percentage will increase by nearly one-third to 16.3 percent—one in six Americans—and will represent nearly 20 million more elderly than there were in 2000. By 2040, the number of elderly aged 85 years and older—the age group most likely to need long-term care services—is projected to increase more than 250 percent from 4.3 million in 2000 to 15.4 million.