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0, 4.0, and 4.5 percentage points in FYs 1982, 1983, and 1984, respectively, for States whose growth exceeded certain targets, OBRA-81 also reduced eligibility for welfare benefits, thus making it harder for poor families to qualify for Medicaid (Klemm, 2000). The legislation of this era began to weaken this link by specifying eligibility criteria based on income in relation to Federal poverty guidelines. In 1991, spending controls were established, provider donations were banned, and provider taxes were capped. As a result of the mandates of the previous era, the recession, and other factors, a great deal of pressure was placed on already strained State budgets, most of which were running deficits by 1991 or 1992. Increasing Medicaid caseloads (average annual growth of 12%) and mounting expenditures prompted some States to turn to alternative financing mechanisms, which relied on disproportionate share hospital (DSH) payments, combined with the use of provider donations or provider-specific taxes as sources of the State share of Medicaid spending (Klemm, 2000).
Current State of Affairs Regarding Elderly Support
Although there have been many recent reforms to government programs that offer support for the elderly, the true cost of reforms such as the drug entitlement expansion is unknown, thus estimates could be understating the real cost. When the new Medicare law was enacted in 2003, the Congressional Budget Office (CBO) estimated the 10-year cost at $395 billion. Less than three months later, the White House Office of Management and Budget (OMB) revealed that it estimated the 10-year cost at $534 billion. This is an increase of more than $200 billion dollars, which is directly attributable to the longer life span of the aging population. All of the various government actuaries have concluded that taxpayers will likely pay far more than the initial official estimates for the first 10 years and trillions of dollars after that.
In addition to the burden on young taxpayers, the reforms have negative impacts on the elderly population itself. For example, when the new drug entitlement took effect in 2006, seniors will paid an increased estimated $420 in additional drug-related premiums in the first year, plus a $250 deductible. Although the government then pays 75% of drug costs up to $2,250, seniors are still paying $3,600 out of pocket before becoming eligible for catastrophic coverage, with the government paying 95% of catastrophic costs and seniors paying 5% (U.S. Department of Health and Human Services, 2006). Unlike the hospitalization payments, which are drawn from dedicated taxes deposited in a trust fund, the government will pay for the drug benefit from general revenues. Additionally, the new Medicare law created a prescription discount drug card, implemented in 2004, that included a $600 subsidy for low-income seniors. Unlike the subsidies provided for seniors under the drug entitlement, the drug card subsidies do not require an asset test for eligibility. The discount card was projected to save between 10% and 25%. For especially poor seniors without coverage, this was an attractive program because it is market-friendly and builds on existing private-sector entities. Unfortunately, Congress decided to eliminate this promising program after just two years of operation, in 2006.
The new drug entitlement took effect in 2006, accelerating the displacement of the existing drug coverage for millions of retirees, including the coverage that many seniors had through former employers.
In addition to the rising health care costs, there are other costs associated with supporting the elderly population as well. The Administration on Aging (2007) predicts that there will be large increases by 2030 in the numbers requiring special services in housing, transportation, recreation, and education. There will also be large increases in some very vulnerable groups, such as the oldest old living alone, older women, elderly racial minorities living alone and with no living children, and elderly unmarried persons with no living children and no siblings (Administration on Aging, 2007). These groups need the most monetary support, since these are also groups with the highest percentages living in poverty or with low incomes. In addition to taxpayers paying the costs of government programs, young people will also bear additional costs of taking care of their elderly family members. This is because the number of persons requiring formal care, such as nursing home care, and informal care at home, will continue to rise. Thus, the younger population must take on nursing home costs or costs to have a nurse take care of the elderly person at home.
The Administration on Aging (2007) points out that elderly living alone presents an additional risk, and the risk mounts when the person living alone has no children or siblings. The research indicates that these characteristics are more common among those 85 years and over as compared with those under age 85; at ages 65 and over only 2% of the population have these characteristics in combination, but at ages 85 and over perhaps 6% have them (Administration on Aging, 2007). Additionally, to compound the problem, the life expectancy for the elderly will probably continue to increase, even in the number of persons with poor health and disabilities, including Alzheimer's disease. These issues become more expensive to support, in combination with other problems. For example, most of the survivors at the highest ages are women and, in particular, widowed women, and this will remain the prevailing sex-marital balance because its principal causes (the premature death of men, including married men, and the very low remarriage rates of elderly women) are expected to persist (Administration on Aging, 2007). The imbalance of the sexes and the low percent of married women have been associated with reduced income, greater poverty, poorer health, and greater risk of institutionalization of older women (Administration on Aging, 2007). Therefore, the majority of the literature indicates that the rising cost of elderly support is an epidemic that will continue to grow.
Other research addresses the debt expenditure problem faced by society through the attempts of "tax and expenditure limits," or a means of limiting the growth of state revenue collections and state expenditures to a population-growth-plus-inflation formula. Under such proposals, state constitutions would be amended to bar state and local expenditures from rising at a percentage rate that exceeds the rate of growth of state population plus an inflation factor (Bradley et.al., 2005). The research indicates that if a population-plus-inflation tax and expenditure limit had been in place in all states from 1990 to 2004, aggregate state own-source expenditures in 2004 would have been $162.7 billion, or 21%, below its actual level (Bradley et.al., 2005). Closing this gap in 2004 could have been achieved by cutting 78% of all state K-12 education budgets; all state Medicaid and transportation spending; or 60% of all other state spending (Bradley et.al., 2005).
However, this method has been criticized on the basis that no existing measure of inflation correctly captures the growth in the cost of the kinds of services purchased in the public sector, so the inflation adjustment generally is not sufficient to allow the continuation of existing services. The subpopulations that state governments serve tend to grow more rapidly than the overall population growth used in the formula. For example, while total population grew by 15.4% from 1990 to 2002, total state prison population grew by 83%, disabled children in schools grew by 35%, and the number of elderly and disabled persons on Medicaid grew by 70% (Bradley et.al., 2005). Additionally, over the next 40 years, the elderly population will grow at twice the rate of general population growth.
All of the available literature in this area points out the problems with the major government programs responsible for providing elderly support. It is ironic that the problems in Medicare are related to the rising health and medical costs of the elderly population, when the technological advances have contributed the longetivity in their life span. The main unanswered question that I found in the literature was a proposed solution in response to the predictions by various program auditors and government agencies. The commonality in the literature was the fact that many of the earlier predictions regarding costs have been inaccurate, so why are these government agencies relying on data. Instead, these agencies should use actual statistics and add in extra costs for some leeway. Another commonality is that the younger taxpayers are carrying the brunt of this debt, and the majority of taxpayers dollars will go toward state-sponsored programs. None of the literature provided a realistic solution to this problem, partly because the reality of the debt has been so hard to predict.
I believe that the government has a few options for offsetting this potential crisis. The implementation of the universal drug entitlement could be halted. Even without a prescription drug entitlement, Medicare is facing formidable financial challenges. Many public and private-sector health policy analysts have repeatedly warned the government of the dangers this presents and have…[continue]
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