Health, aging and economics

Excerpts from two articles relating to the high cost of health and aging in our future.

Illness triggers half of bankruptcies

Medical bills and illnesses are a
major cause of roughly half of this country’s personal bankruptcies, according
to the study published today on the Web site of the journal Health Affairs.

Touted as the first in-depth
analysis of medical causes of bankruptcy, the study looked at 1,771 court
records of people who filed for bankruptcy in 2001 in five federal districts,
including one in Illinois. More than half of those bankruptcy filers were
interviewed in detail about their finances and health. The researchers
determined that 46.2 percent to 54.5 percent of the nearly 1.5 million personal
bankruptcy filings in 2001 could be chalked up, in large part, to medical
problems.

"Unless you’re Bill Gates,
you’re just one serious illness away from bankruptcy," said Dr. David
Himmelstein, lead author of the study and associate professor of medicine at
Harvard. "Most of the medically bankrupt were average Americans who
happened to get sick. Health insurance offered little protection."

The researchers estimated that some
40,168 of Illinois’ 79,777 personal bankruptcies last year were medical
bankruptcies, affecting 111,544 debtors and their families.

The study found that the majority of
medical bankruptcy filers nationwide were middle-class homeowners with some
college education. They usually had health insurance, too. More than 75 percent
of people in medical bankruptcy were insured when they first got sick.

"Families with coverage faced
unaffordable co-payments, deductibles and bills for uncovered items like
physical therapy, psychiatric care and prescription drugs," Himmelstein
said. "And even the best job-based health insurance often vanished when
prolonged illness caused job loss — precisely when families needed it most."

"A larger share
of American workers are going to have insurance that’s like a paper
umbrella," Woolhandler said. "It looks good, and it might even
protect you in a sprinkle, but it melts away in a downpour."

Among those whose
illnesses led to bankruptcy, out-of-pocket medical costs averaged $11,854.
Cancer proved to be a costly diagnosis, with the average patient racking up
$35,878 in expenses.

Aging Population
Poses Global Challenges

Social Security’s financial problems are a relatively small sliver of the far
larger challenges posed by an aging population, economists say.

From untamed health care programs to military pensions, housing and heating
assistance to coal-miners’ benefits, programs for the elderly have proliferated
and grown more generous, even in the face of an aging trend that demographers
have long seen coming. In that light, the fight over Social Security marks only
the beginning of a national debate over the cost of a graying society — and
the inevitable reallocation of resources that is sure to produce winners and
losers, in the United States and around the world.

"The question is whether we can support the elderly with a decent
standard of living without imposing a crushing burden on the young," said
Richard Jackson, director of the global aging initiative at the Center for
Strategic & International Studies. "Whether we can is a real
concern."

In just 10 years, spending on the elderly will total nearly $1.8 trillion,
almost half the federal budget, according to new Brookings Institution and Congressional
Budget Office projections. That is up from 29 percent in 1990 and 35 percent in
2000.

Other countries are not likely to help foot the bill for the United States’
aging population, as they currently do with the U.S. trade and budget deficits.
The populations of Japan, Germany and other countries that have large pools of
savings are aging even faster than the United States’, and as they do, retirees
will start to spend their nest eggs, sapping the capital that now helps drive
business expansion and rising living standards worldwide, including in the
United States.

China, because of its one-child policy, will face a demographic crisis of
its own, and India, though growing fast, cannot hope to accumulate enough
capital to help, international economists say.

No challenge "is as certain as global aging," said the Center for
Strategic & International Studies in another recent study, "and none
is as likely to have as large and enduring an effect — on the size and shape
of government budgets, on the future growth in living standards, and on the
stability of the global economy and even the world order."

Some economists and interest groups say such fears are overblown. The real
problem, they say, lies not so much in demography but in a health care system
that is the world’s most expensive and least efficient. The cost of Bush’s
Medicare prescription drug benefit alone — $8.1 trillion in 75 years — dwarfs
the $3.7 trillion estimated shortfall in Social Security in that stretch.

Get control of federal health care costs — through better use of technology
and better management of chronic illnesses and disabilities — and the problem
of an aging population will look a lot less intractable, said John Rother,
policy director at AARP, the advocacy group for retirees and near-retirees.

The Congressional Budget Office estimated five years ago that federal
spending on the elderly would grow to more than $1 trillion — 43 percent of
the budget — by 2010 from $615 billion — or 35 percent of the federal budget
— in 2000. By 2015, spending on the elderly will consume nearly half the
federal budget, through Medicare and Medicaid, pensions for federal workers and
military retirees, veterans’ health care and pensions, coal miners’ benefits,
Supplemental Security Income, food stamps, heating and housing assistance, and
other programs for the elderly, according to the Brookings Institution.

At that point, Medicare spending will be growing at more than 8 percent a
year and Medicaid at nearly 9 percent — rates that dwarf the problems of
Social Security, said Douglas Holtz-Eakin, the CBO’s director.

"Medicare and Medicaid spending triples, maybe quintuples by 2050,
while Social Security goes up by 50 percent," said Holtz-Eakin, a former
White House economist.