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The major reason: Rising costs to support younger people with disabilities. But while CBO projects that overall program spending will increase from $389 billion in 2018 to $702 billion in a decade, most of that growth likely will result from the increasing needs of the non-elderly. The aging Boomers will drive some increase in Medicaid spending. And while Medicaid does provide long-term care services, it only does so for those who are very poor. The Older Americans Act also provides only modest-though important-benefits. Today, Medicare covers medical treatment for older adults but only limited long-term services and supports. And we do not have enough private savings or insurance to finance this assistance.
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Half of all Americans over 65 have a high level of need for personal care services. In 2005, it spent about 6 percent.Īnd there is a second reason: The likelihood that the federal government will need to put more resources into long-term services and supports for frail elders, as well as younger people with disabilities. To put it another way, the government will spend about 10 percent of the nation’s Gross Domestic Product on older adults. And by 2029, it will rise to half of all non-interest spending, or about $3 trillion. By last year, the share grew to 40 percent, or $1.5 trillion.
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But it also has critical implications for US fiscal policy as the Boomers continue to age.Īccording to a new report by the Congressional Budget Office, the federal government spent about one-third of its budget on seniors in 2005 (see pages 12-14). That was an important choice the US made when it created Social Security in the 1930s and Medicare in the 1960s. In effect, we are socializing some of the costs of aging. Without this federal spending, the burden of caring for parents would fall even more heavily on their children. As CBO importantly notes, it is misleading to think of this trend simply as a transfer of tax dollars from younger people to older people.