As Americans age, a demographic crisis looms

America’s aging population poses a major and mounting challenge for the nation. 

The elderly’s burgeoning needs for financial aid, caregiving and assistance, together with the rising costs for medical treatment, health care and drugs, are not only overwhelming household budgets, they’re also increasingly straining government resources aimed at the elderly.

The annual reports of Social Security and Medicare Trustees released in June found that Medicare hospital insurance and Social Security trust funds are rapidly approaching insolvency, which is expected in six and 13 years, respectively.

Elderly people in America constitute the fastest-growing age group. Since the start of the 21st century, the population in the age group 65 years and older grew by about 58 percent. In contrast, those in the age groups 20 to 64 years and under 20 years increased by 17 percent and 1 percent, respectively. 

The proportion of Americans aged 65 years and older has increased substantially. For example, since Medicare was established in 1965, it has nearly doubled from about 9 percent to 17 percent. Moreover, by mid-century 1 in 5 Americans — 21 percent — is expected to be the aged 65 years and older.

Also, the majority of the older population consists of women, with the proportions increasing at higher ages. The proportion of women ages 65 to 79 years, for example, is 53 percent —  this increases to 61 percent for those 80 years and older.

Additionally, life expectancies for older Americans have also increased. Life expectancies for men and women at age 65 have risen from 13 and 16 years in 1965 to 17 and 20 years in 2020, respectively. 

An important economic consequence of America’s aging population is fewer workers per retired person. In 1960, there were about six 20-64-year-olds for each person aged 65 years and older. That figure today is close to three and is expected to continue declining, reaching approximately two around mid-century.

Most elderly people in America, about 61 percent, live with their spouses. However, the proportion residing with a spouse or partner is substantially higher for men than for women, 73 percent versus 50 percent. 

Also, about 27 percent of those aged 65 years and older live alone. And approximately 5 percent reside in nursing homes and 2 percent live in assisted living facilities. 

Social Security is the largest program in the federal budget, accounting for nearly one-quarter of total federal spending or about $1,135 billion in the fiscal year 2021. Social security provides benefits to approximately 20 percent of America’s population, about 65 million beneficiaries.  

Medicare accounts for about 12 percent of the federal budget, about $776 billion. In 2020, nearly 63 million people enrolled in Medicare — triple the number from 1970. By midcentury, the number of Medicare enrollees is projected to reach about 87 million.

Congress needs to act responsibly, sooner rather than later, to address the expected funding imbalances and insolvency in the Social Security and Medicare programs. Not doing so would lead to across-the-board benefit cuts or abrupt changes to benefits or tax levels. 

Possible changes in Social Security include gradually raising the retirement age for full benefits to 70 years and eliminating the early retirement option with reduced benefits. Other changes would be to reduce benefits, have higher income caps and raise payroll tax rates.

Regarding Medicare, possible measures include increasing the monthly premiums paid by the elderly and raising payroll taxes. However, those actions in themselves would be insufficient to address the program’s expected funding shortfall because premiums and payroll taxes together cover about half of the program’s cost. 

Another policy change that would contribute to addressing Medicare’s financial problem is to raise the eligibility age for Medicare from 65 to 70 years. Individuals would need to continue relying on private health insurance programs until they reach Medicare’s revised eligibility age of 70 years.  

In addition to congressional actions, educational, public health and community policies and programs need to encourage responsible behaviors among Americans in preparing for and during old age. Men and women need to take action and develop habits that promote their personal health, economic security and overall wellbeing, which will not only reduce costs but also contribute to the quality of life in old age. 

America is not alone in facing the aging population challenge. Nearly all developed countries and many developing countries with low fertility rates and increasing longevity are experiencing the 21st century’s unprecedented demographic aging. 

Japan and Italy, for example, have about one-quarter of their current populations aged 65 years and older, and that proportion is expected to be more than one-third by mid-century. Similarly, China’s proportion of elderly is expected to increase from one-eighth of its current population to one-quarter by 2050.

To address the expected financial shortfalls, Democrats, which took the lead in establishing Social Security and Medicare, are committed to maintaining and strengthening funding for those two programs. The Republican Party, however, is reluctant to raise taxes and generally adheres to a governing principle articulated by one of its venerated leaders some 40 years ago, namely, “Government is not the solution to our problem; government is the problem.” 

Due to those significant differences, congressional actions to address the projected insolvencies of Medicare in 2028 and Social Security in 2035 will involve difficult negotiations and are likely to take place later rather than sooner.

Joseph Chamie is a consulting demographer, a former director of the United Nations Population Division and the author of numerous publications on population issues, including his recent book, “Births, Deaths, Migrations and Other Important Population Matters.”