At a House Budget Committee hearing last week, the chief actuaries for Medicare and Social Security once again reminded lawmakers of the serious demographic and fiscal challenges lying ahead for both programs and the federal budget.
Richard Foster, chief actuary of the Centers for Medicare and Medicaid Services, told lawmakers that by 2030, when most baby boomers have enrolled in Medicare, there will be 65 percent more beneficiaries than there are today, but only 15 percent more covered workers.
Total health expenditures for Medicare, Medicaid and other programs are estimated to increase from 17.9 percent of GDP in 2010 to 19.8 percent by 2020. If the growth rate over the last 20 years continues, Foster said, “health care would represent an untenable proportion of total economic production.”
Stephen Goss, chief actuary for the Social Security Administration, testified that by 2040 there will be only two workers for every Social Security beneficiary, compared to three workers from 1975 through 2008. The cost of Social Security will shift from 4.5 percent of GDP to 6 percent by 2040 but revenues coming into the program will remain at only 4.5 percent of GDP. As a result, making Social Security sustainable will require an increase in revenues, a decrease in benefits, or some combination of both.
The Concord Coalition has long warned that structural reforms are needed to make entitlement programs fiscally sustainable over the long term. The testimony of the actuaries is a reminder that until these difficult choices are made, the strain on the federal budget will only grow worse as the baby boomers continue to retire.