February 14, 2008

Is It A Crisis Yet?

USA Today reports that spending on senior entitlements has risen 24% after adjusting for inflation since 2000. Despite no increase in the population percentage receiving benefits, the actual dollars spent on senior benefits in Medicare, Medicaid, and Social Security rose from $600 billion to $952 billion. Senior care has now become Job 1 of the federal government:

The cost of government benefits for seniors soared to a record $27,289 per senior in 2007, according to a USA TODAY analysis.

That's a 24% increase above the inflation rate since 2000. Medical costs are the biggest reason. Last year, for the first time, health care and nursing homes cost the government more than Social Security payments for seniors age 65 and older. The average Social Security benefit per senior in 2007 was $13,184. ...

The federal government spent $952 billion in 2007 on elderly benefits, up from $601 billion in 2000. It's the biggest function of the federal government. States chipped in another $27 billion in 2007, mostly for nursing homes.

George Bush tried tackling the easiest and least expensive of the three major entitlement programs in 2005. Congress rebuffed him, ostensibly because he proposed private-sector solutions and reforms, but mostly because they wanted to avoid the political consequences of facing the coming disaster. Instead of going away, however, it now appears to be growing almost exponentially.

It will only get worse. In three years, the first of the 79 million baby-boomers will begin to retire at 65. The senior population will start increasing dramatically from that point forward, both in terms of percentage and in real numbers, and fewer workers will remain in the system to support their benefits.

In short, we're looking at a mild form of the problem Europe faces now, and it will get worse quickly.

Meaningful reform should have already been in place by now. 2011 was a fairly easy deadline to calculate, and yet we still have politicians in DC that say there's no cause for immediate concern. Those few who offer solutions mostly base them on extending government responsibility, either through insurance mandates or single-payer solutions that will be akin to pouring gasoline on an inferno.

Senior care should not be Job 1 of the federal government. We need to rethink the entire models of entitlements, and we need to start that process now.

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