America's Aging Population: Trends and Uncertainties

Projecting the Elderly Population: How Many?

Over the past 25 years, the number of persons aged 65 and older in the United States has risen at an unprecedented rate (Manton and Stallard, 1994). More recently, in the 10-year period between 1980 and 1990, census data show an increase in the number of persons aged 65 and older from 25.5 million in 1980 (11.3 percent of the total U.S. population) to more than 31 million in 1990 (12.5 percent of the total U.S. population). During the same time period, the population of those aged 85 and older grew even more markedly: from 2.2 million in 1980 (1 percent of the total U.S. population) to 3.0 million in 1990 (1.2 percent of the U.S. population) (Bureau of the Census, 1996).

The proportion of the total U.S. population over age 65 will continue to increase dramatically in the coming decades. According to the Census Bureau's ''middle series" population projections, the population aged 65 and older will make up 20.4 percent of the U.S. population in 2050, an increase from 13.3 percent in 2010 and 12.5 percent in 1990 (Bureau of the Census, 1996).¹ Under the same assumptions, the oldest old (those aged 85 and older) are projected to account for 4.8 percent of the U.S. population in 2050, up from 2.0 percent in 2010 and 1.2 percent in 1990.

The minority elderly, who differ significantly from the white (non-Hispanic) older population in terms of wealth and poverty status, will be growing at a considerably faster rate than the older population as a whole. Minority persons aged 65 and older accounted for 13 percent of the elderly population in 1990; they are expected to account for 16 percent of the elderly population in 2000, 22 percent in 2020, and 33 percent by 2050 (Bureau of the Census, 1996). Consequently, future cohorts of the elderly are expected to be much more heterogeneous than earlier cohorts in terms of race, ethnicity, and socioeconomic status.

Uncertainty looms around such projections, however; population projections are based on a series of assumptions about the future of fertility, mortality, and net immigration that may not necessarily hold in the future. For example, the Social Security Administration's projections of mortality imply a sharp slowing of the rates of decline of mortality at all ages, relative both to the previous two decades and to longer run historical trends back to 1900. (These results are inherent in their methodology, which extrapolates rates of decline in age-specific death rates for specific causes of death over the previous 20 years—see Lee and Skinner, 1996; Singer and Manton, 1993.) Projections by other researchers (e.g., Lee and Carter, 1992) extrapolate the rates of decline in age-specific mortality rates observed over the 20th century (not disaggregated by cause of death), which have been fairly steady despite periods of faster and slower progress. Hence, such projections imply a larger elderly population than do the SSA projections (or those developed by the Census Bureau).

Projections about future numbers of the "oldest old" are particularly uncertain. Not only are data scarce on the relatively small cohorts of people who have survived to age 85 and older, but data on the oldest old likely suffer from greater measurement error (Taeuber and Rosenwaike, 1992). The simple extrapolation methods often relied upon in making official projections may be neither adequate nor appropriate (Suzman, Manton, and Willis, 1992). Changing life expectancy at older ages, some would argue, is the largest source of uncertainty in Social Security Trust Fund solvency. It is crucial that researchers and policy makers be able to estimate the number of elderly persons in the future population, especially when developing legislation to ensure the fiscal stability of the Social Security system.

Health and Disability

Whether widely reported increases in life expectancy have been accompanied by changes in the prevalence of chronic disability remains unclear. ² Studies using data from the 1970s and early 1980s point to modest increases in the prevalence of disability at older ages (Crimmins, Saito, and Ingegneri, 1989; Riley, 1990; Verbrugge, 1989). More recent evidence suggests, however, that this pattern may have reversed itself since the mid-1980s, with a decline in reported functioning problems among the old (Crimmins and Ingegneri, 1992; Manton, Corder, and Stallard, 1993; Yeas, 1987). An analysis of data from the 1982, 1984, and 1989 National Long-Term Care Surveys showed that both preservation of functioning in the nondisabled population and increased life expectancy for disabled persons occurred: overall, the analysis showed a significant improvement in the functional status of older cohorts at the end of the 1980s, compared with those who belonged to older cohorts at the beginning of the 1980s (Manton, Corder, and Stallard, 1993), It is possible that current cohorts of persons aged 65 and older have reaped the benefits of such improvements as better nutrition, water quality, and hygiene that occurred when they were young.

Another explanation posited for the decline in poor health and disability at older ages is that recent cohorts of elderly are and will continue to be better educated than past cohorts of elderly, and higher education is associated with better health and positive health behaviors. While more than 45 percent of those aged 75 and older in 1994 had not graduated high school, this figure falls to 32 percent among those aged 65–74 and drops to less than 15 percent for those aged 45–54 (Bureau of the Census, 1995). The relationship between education and mortality, morbidity, and health behaviors has been demonstrated across numerous studies. For example, an analysis of National Longitudinal Mortality Study data showed that if educational differentials among people who died of heart disease were eliminated, the excess mortality of those with 0–8 years of schooling, relative to those with some college, would be reduced by 57 percent for males aged 65 and older and by 67 percent for women aged 65 and older (Rogot, Sorlie, and Johnson, 1992).

The explanations posited for the relationship between education and health are numerous. People with higher levels of education, in general, have higher potential income levels and are thus able to purchase more health-enhancing goods and services. Education is also associated with a variety of risk factors and health behaviors. Shea et al. (1991) examined educational differentials for a variety of risk factors in a 1989 New York state sample and found that better educated people are significantly more likely than less educated people to engage in aerobic exercise and to know their blood pressure and less likely to smoke or to be overweight. Similarly, an examination of 1979–1986 data from the Stanford Five-City Project showed that level of schooling is significantly associated with cigarette smoking, hypertension, serum cholesterol, body mass index, weight and health knowledge (a 17-item scale of knowledge about cardiovascular risk factors): in all cases, the risk factor distribution of poorly educated people was more adverse (Winkleby et al., 1992). Dramatic strides in medical knowledge and technology during the 1980s also may have had an effect on disability levels over the decade. Advancements such as hip replacements, lens replacements for people with cataracts, angioplasty for heart diseases, antihypertension drugs, and exogenous estrogens to reduce postmenopausal symptoms are among the developments credited with reducing elderly disability (Studies of Left Ventricular Dysfunction Investigators, 1991; Nabulsi et al., 1993).

Macrolevel social and economic trends may also play a role in determining the health of current and future generations of the old. Evidence from other nations illustrates such relationships. The decline in the economies of Eastern Europe since World War II has been associated with a decline in the health status of the populations, while the improved prosperity of Japan during the same time period has been associated with a marked improvement in health status (Frank and Mustard, 1994). A recent analysis for the World Bank concluded that the quality of the social environment in which families live and work—in addition to deterioration in the physical environment—was a major factor in explaining the decline in health status in Eastern Europe (Hertzman and Ayers, 1993). In contrast, the improvement in the health of the Japanese is associated with economic prosperity and an apparent ability to sustain reasonable income equity and the quality of social environments throughout the society (Marmot and Davey-Smith, 1989).

An understanding of the health of future cohorts of elderly is crucial. Projections of the elderly disabled population are used by a number of federal agencies with responsibilities for disability benefit programs, and by policy makers interested in modifying programs and proposing new services for this population (Freedman and Soldo, 1994). Projections vary considerably, however, depending on how the underlying survey defines disability and on what criteria are used by researchers when they analyze disability. Surveys of the aging population generally focus on a person's ability to carry out activities essential to maintaining independence. However, researchers may add further stipulations to their definitions of disability, such as duration of one's disabled condition.³ The accuracy of such projections may have major fiscal ramifications. For instance, delayed mortality—accompanied by continued declines in disease and disability prevalence—may have major negative implications for the Social Security Trust Fund. Alternatively, better health of older cohorts might affect the Medicare Part A Trust Fund positively: although larger cohorts of elderly persons may become dependent on programs such as Medicare in the future, their better all-around health may result in lower costs or lower cost increases. Effective planning for medical, rehabilitation, and social services requires reliable estimates of the number and characteristics of current and future disabled people.

Long-term and Acute Care Arrangements

One of the most crucial issues for the quality of life of aging Americans is the cost and availability of acute medical and long-term care. Although the elderly make up roughly 12 percent of the U.S. population, they account for more than 33 percent of total health expenditures (Waldo et al., 1989). Researchers are only beginning to collect data on the diverse care arrangements that elderly Americans are selecting. Moreover, the distinctions between "acute care" and "long-term care" are increasingly clouded, with funding sources—rather than the site or type of care—becoming the main point of differentiation (Kane and Kane, 1990).

Acute care is generally defined as including hospital care, physician services, and prescription drugs. Long-term care, in contrast, has evolved from an emphasis on purely institutional care to a broad range of services in both institutional and community settings. Under this broader definition, homemaker services, nutrition programs, congregate housing, and visiting nurse services are all part of long-term care (U.S. Senate Special Committee on Aging, 1992). The increasing size of the old population and the fact that health clearly declines with age suggest that an increasingly large number of people will seek long-term care as part of the continuum from independent living to assisted living at home to institutional care (Kane and Kane, 1990).

Long-term care and acute care will continue to place financial pressures both on families and public funds. Long-term care arrangements are seldom covered by private insurance or Medicare.⁴ Total expenditures for long-term care in 1993 reached $75.5 billion —$54.7 billion for nursing home care and $20.8 billion for home care—yet only $13.7 billion was paid by Medicare. Roughly two-thirds of the total bill was paid by out-of-pocket spending ($33.5 billion) and Medicaid ($26.0 billion) (Wiener, Illston, and Hanley, 1994). Still, the demand for noninstitutionalized long-term care is high. While Medicaid long-term care expenditures increased by 8.6 percent from 1993 to 1994—roughly equal to overall Medicaid expenditure growth—Medicaid spending for noninstitutional care grew by 26 percent, from $6.7 billion to $8.4 billion (Stone, 1996).

Just as long-term care expenditures have risen, the burden on the elderly to finance their own health care has also increased. Consumer Expenditure Survey data show that more of the total budget of those aged 65 and older now is consumed by out-of-pocket health care expenditures than was the case in the 1980s (Hitschler, 1993). Between 1980 and 1990, health insurance as a share of total health expenditures expanded from 37 percent to 48 percent for those aged 65–74 and from 26 percent to 45 percent for those aged 75 and older. As health care costs rise, older persons are paying higher health plan premiums, deductibles, and copayments, and more older persons are buying commercial supplements to Medicare, which is causing a shift in health expenditure shares from medical services to health insurance for both age groups.

Among the future policy concerns related to health care are questions about whether Medicare and Medicaid funding will be reduced drastically, whether proposed health care reforms will lead to increased reliance on managed care, and the degree to which federal policy shifts decision making to the state level. Moreover, policy makers increasingly are interested in quality assurance and health outcomes. Quality assurance issues pertinent to long-term care include consumer risk-taking related to quality of care; whether and how quality standards and assessments should differ depending on care setting; whether and how standards and assessments should differ on the basis of the consumer's degree of cognitive impairment; and the rights and perquisites of the long-term care labor force. Likewise, it is expected that consumers may search for less costly, better quality care alternatives, including subacute care, home health care, and assisted living. Long-term care insurance is expected to attract more interest in the future: as of 1992, however, only about 350,000 long-term care insurance policies had been sold (Health Insurance Association of America, 1993), and these policies remain unaffordable to most elderly (Wiener, Illston, and Hanley, 1994).⁵

Work and Retirement Patterns in Later Life

Most American men and women are healthy and active long after they pass their 62nd birthday—the earliest age of eligibility for Social Security retirement benefits. Ironically, though, labor force participation rates of older men and age at retirement have declined at precisely the time that the health of older Americans has improved. A trend toward early retirement was rapid and dramatic from 1950 through the mid-1980s, but this trend, as well as declining labor force participation rates of older men, has recently stabilized (Quinn and Burkhauser, 1994; see also Lumsdaine, 1996).

Government and corporate policies that discourage work at older ages have started to change during the last decade. Recent legislation has outlawed mandatory retirement, banned the cessation of service year credits in pension calculations after a certain age, and increased the Social Security credit for delayed retirement after the age of 65. The age of "full benefits" (100 percent of the primary insurance amount) is scheduled to increase from 65 to 66 between the years 2000 and 2005 and then from 66 to 67 between 2017 and 2022.

Moreover, employer pension coverage has undergone a shift away from defined-benefit to defined-contribution plans, and this shift may complicate researchers' understanding of how cohorts reaching old age in the future will experience retirement (Uhlenberg and Miner, 1996).⁶ The growth of defined contribution plans relative to defined benefit plans may reduce incentives for early retirement, may accentuate the already significant role of pensions in creating income inequality within cohorts in later life, and may lead to increasing uncertainty about future pension incomes in retirement (Paine, 1993; Quinn and Burkhauser, 1994).

The retirement behavior of future cohorts is equally uncertain. Part-time employment and self-employment have emerged as new forms of early retirement. Older workers are now reducing their hours rather than completely severing their ties with the labor force. Whether or not older workers remain with their employers beyond age 62 depends on many factors, including Social Security, private retirement policies, private pension plans and health benefits, and contemporaneous labor market conditions (Quinn and Burkhauser, 1994). Individual workers make their retirement decisions on the basis of the financial incentives they face, while employers must assess whether it is in their best interest to retain older workers. Future research will necessitate data collection at the individual, employer, and benefits-provider level to address such questions.⁷

Income, Wealth, and Quality of Life

Older Americans as a group have made impressive gains in their economic well-being over the past 30 years. At the same time, the economic position of nonelderly persons aged 18–64 has declined somewhat, and the economic position of children has eroded considerably. Poverty rates for the elderly and nonelderly were nearly identical in 1994 ⁸—11.7 percent and 11.9 percent, yet these rates are parts of very different patterns. The proportion of elderly living in poverty declined substantially, from 25 percent in 1970 to 16 percent in 1980 to 12 percent in 1990, while the proportion of persons aged 18–64 living in poverty increased slightly, from 9 percent in 1970 to 10.1 in 1980 to 11 percent in 1990 (Bureau of the Census, 1996).⁹

Despite the economic strides made by the elderly during the past 30 years, relative to children and adults aged 18–64, not all segments of the older population have shared equally in these gains. Elderly blacks and Hispanics are two to three times more likely than non-Hispanic whites to be poor. The proportion of persons aged 65 and older who were poor in 1994 was 10.2 percent among whites, 27.4 percent among Hispanics, and 22.6 percent among blacks (Bureau of the Census, 1996).

Poverty rates among the elderly also vary widely by sex and living arrangement. Elderly white persons in married-couple families were less likely in 1992 to be in poverty (5.2 percent) than comparable black (19.6 percent) or Hispanic (12.7 percent) families. Women living alone were particularly subject to poverty: among women who did not live with relatives in 1992 ("unrelated individuals" in census terminology, most of whom live alone), poverty rates were 24 percent for white women, 50.7 percent for Hispanic women, and 57.5 percent for black women. The economic disparities seen within the U.S. older population are even more striking when compared with other industrialized nations. Elderly couples in the United States have the highest income and wealth in the OECD (Organization for Economic Cooperation and Development) world, according to findings from the Luxembourg Income Study, but the average income of older women living alone in the United States ranks below all other major industrialized countries except Australia (Holtz-Eakin and Smeeding, 1994).

The sources of income that the elderly rely on also vary widely, especially when age of recipient is considered. Only 30 percent of the total income of those aged 65–69 comes from Social Security, but this figure increases to more than 50 percent for those aged 80 and above. Conversely, private pensions or annuities account for more than 10 percent of the total income of those aged 65–69, but only 6.3 percent for those older than 85 (Hurd, 1996).

The elderly population, as a whole, is in a privileged position in terms of assets—especially if home values are considered. The elderly have had longer to accumulate their assets, and aggregate levels of elderly net worth reflect this. An analysis of data from the Survey of Income and Program Participation (SIPP) showed that from 1988 to 1991 real median net worth for all households fell from $41,172 to $36,623, while the median net worth of the elderly remained around $88,000 (Eller, 1994). However, wealth, like income, varies widely among the elderly by age and marital status. According to 1993 data from the AHEAD survey, the median nonhousing wealth of married persons aged 70–74 was $60,000, more than three times that for unmarried persons ($18,000) of the same age. The disadvantaged position of the unmarried elderly is underscored when homeownership is examined. Homeownership rates range from 75 percent (for those aged 85 and older) to 90 percent (for those aged 70–74) among the married elderly; these rates are roughly 50 percent higher than the homeownership rates of the unmarried, which range from 48 percent (for those aged 85 and older) to 65 percent (for those aged 70–74) (Hurd, 1996).

Accurate assessment of the economic future of the elderly is contingent on the availability of data that contain detailed and accurate information on respondents' assets, income from all sources and that permit analyses of relevant sub-populations. Moreover, the economic status of future cohorts of the older population is much more likely to be influenced by income from occupational (private) pensions, from assets and wealth, and from part-time earnings, than is the current generation of elderly. These sources of income all reflect increased reliance on individual decision making by older persons and are thus more difficult to predict than are formula-driven sources of income, such as Social Security or Supplemental Security Income (SSI) (Smeeding and Torrey, 1996).

In addition, the older the population, the more important are measures of wealth (such as net worth) and consumption in determining their economic status, along with the nature and size of intergenerational transfers of wealth, both during their lifetimes and at death. The life-cycle hypothesis of saving posits that assets increase during the working years of the life cycle and decline after retirement as savings are spent to finance daily life, yet evidence on whether households accumulate or decumulate wealth during the retirement years is mixed. Economic theory assumes newly retired persons would avoid using savings as long as possible, given that most people are relatively healthy on retirement but still face significant uncertainties about future health and longevity. However, a large number of persons reach retirement with little or no savings. Some indirect evidence suggests that inheritances may substantially increase the wealth of baby boomers as they enter the young old ages, with research indicating that most inheritances go to householders in their 50s and 60s (Greenwood and Wolff, 1992). Thus, a shift in emphasis from income to wealth and consumption measures in data is needed if an accurate picture is to be drawn.

Living Arrangements and Family

Families have undergone a transformation in the last 30 years: divorce rates have increased, fertility has declined, and marriage and childbearing have been postponed to later ages. Although these trends may have little effect on the living arrangements and support networks of today's elderly, they could very well have important implications for the lives of baby boomers as they reach old age. Declines in birth rates during the past 30 years may mean that the elderly baby boomers will have fewer children who are a potential source of care. As women's labor force participation rates gradually approximate men's, it is uncertain whether working women will continue to be a source of care for their aging parents.

The availability of family members to provide care is an important factor in the lives of elderly Americans. Evidence from current cohorts of elderly people shows that families continue to be the mainstay of support for older, impaired persons: 70 percent of older persons who have a disability and live in the community (i.e., not in institutions) rely on family members as their sole source of care; another 23 percent use some combination of family and formal (paid) providers. The majority of unpaid caregivers of the disabled are women, usually wives, daughters, or daughters-in-law (Stone, Cafferata, and Sangl, 1987). Only 7 percent use formal care arrangements exclusively (Wolf, 1994; Soldo and Freedman, 1994).

The living arrangements of the elderly vary widely by gender, due largely to the gender gap in mortality. In 1994, more than twice the proportion of elderly women lived alone or with nonrelatives (42 percent) than elderly men (19 percent), likely due to the fact that many more women than men are widowed. Moreover, future cohorts of elderly are likely to have even more diverse living arrangements, given trends in divorce, remarriage, and blended families (Smeeding and Torrey, 1996).

Residential Patterns

Policy makers are interested not only in with whom the elderly live, but where they live. The older population is distributed very unequally among the 50 states. In 1994, persons aged 65 and older accounted for 12.7 percent of the U.S. population overall, but they accounted for more than 15 percent of the population in five states: Florida (18.4 percent), Pennsylvania (15.9 percent), Rhode Island (15.6 percent), and Iowa and West Virginia (15.4 percent each) (Bureau of the Census, 1995). The elderly are also distributed very unequally by urban or rural region: in 1990, about 23 million elderly Americans lived in metropolitan areas and only 8.2 million lived outside metropolitan areas. The elderly represented a higher proportion of nonmetropolitan residents, however: 15 percent in nonmetropolitan areas and 12 percent in metropolitan areas. The agglomeration of older populations will have significant effects on service delivery patterns and demands for various tax-financed local goods, such as recreational facilities and long-term care services.

To the extent that living costs and living patterns are different among states, having geocoded data about the elderly will be increasingly important. To the extent that health conditions vary by climate, projections of future health status would benefit from taking into account the unequal geographical distribution and growth rates of the elderly. Finally, a better understanding of the effects of growing concentrations of older persons on local service delivery and demands is needed (Longino, 1990), which suggests a need for data on local fiscal patterns, such as taxation and service provision, as well as household data.

Migration, and the accompanying growth in the size and share of the older population, also has important implications for the tax base and service programs of state and local governments. States and local areas that receive large numbers of elderly migrants may fare better than areas without this type of growth. The concentration of older persons in a specific area is not due only to the in-migration of retirees, however. Elderly persons who move long distances tend to be younger, healthier, better educated, and wealthier than those who do not move (Bean et al., 1994; Longino, 1990). Moreover, migration often carries with it substantial amounts of retirement income transfers. In 1989, Florida was estimated to have received a net $6.5 billion in transferred income due to interstate migration of the population aged 60 and older, while New York lost a net $3.3 billion to other states, with more than one-half of that loss ($1.9 billion) going to Florida (Longino, 1995).

Certainly, states whose populations are disproportionately made up of older persons will shoulder relatively larger financial responsibilities for Medicare and other state and locally funded programs. This situation can be exacerbated if the area is also losing its working-age and tax-paying populations (Bean et al., 1994).

Summary

Future generations of persons aged 65 and older will differ markedly from the older population today, in terms of their size, characteristics, and behaviors. Consequently, researchers cannot simply rely on characteristics of the current generation of elderly to predict behaviors and outcomes for future generations of older Americans.

Although it is relatively certain that the United States will experience a ''boom" in the absolute size and growth rate of the elderly population, as well as increased diversity and an increased proportion of the oldest old (85 and older), some characteristics of the elderly of tomorrow are less predictable. The health and disability status of future cohorts of the elderly may vary widely, depending on individual characteristics such as educational attainment, socioeconomic status, and race and ethnicity. Medical advances or unforeseeable macroeconomic and social shifts may also influence the health of future cohorts of the aged. Older persons' preferences for medical care and the ability of individuals and social programs to shoulder the bill for such care also are not well understood. Whether older, healthy workers will retire at older ages also is unknown; ongoing changes in government and corporate policies will play a role in molding labor force participation rates of older Americans.

The size and characteristics of the older population will have important social and economic implications. An understanding of the aging population and its social ramifications is contingent on the availability of thorough and detailed data on current and future cohorts of the elderly, as well as the development of appropriate methodology for studying the aging population.

Footnotes

1

The middle series population projections assume a total fertility rate in 2050 of 2.15, life expectancy at birth in 2050 of 79.7 years for males and 85.6 years for females, and an ultimate net migration of 880,000 per year. In contrast, under the "high life expectancy" series of projections, the proportion of Americans aged 65 and older is expected to be 22.7 percent in 2050. The high life expectancy series assumes the same total fertility rate and ultimate net migration as the middle series, but assumes a life expectancy at birth of 83.8 years for males and 91.1 years for females (Bureau of the Census, 1996).

2

Chronic disability is most frequently measured in surveys by indicators of activities of daily living, or ADLs (Katz and Apkom, 1976) and instrumental activities of daily living, or IADLs (Lawton and Brody, 1969). ADL measures encompass items describing an individual's ability to perform basic self-care activities, such as bathing, dressing, and feeding oneself (Katz and Apkom, 1976). IADLs assess independence in activities requiring adaptation to the environment, such as shopping, preparing meals, and carrying out household chores (Lawton and Brody, 1969).

3

For example, projections of the future disabled elderly population using data from the 1984 National Long-Term Care Study define disabilities as conditions that last at least 90 days (Manton, 1989). In contrast, projections of the future disabled elderly population based on data from the 1984 National Health Interview Survey Supplement on Aging do not specify whether a disability has lasted or is expected to last at least 90 days (Zedlewski et al., 1990).

4

Medicare and Medicaid cover different expenses. Medicare, authorized under Title XVIII of the Social Security Act, is a federal health insurance program that serves almost all elderly and some disabled persons. The Medicare program has two parts: Part A, the hospital insurance (HI) component, and Part B, the supplemental medical insurance component. Part A pays for hospital care, some skilled nursing facility care, limited amounts of skilled home health care, and hospice care. Part B covers physician services, hospital outpatient services, and a variety of other medical and health services, such as laboratory and diagnostic tests. However, Medicare does not cover prescription drugs and only minimal long-term care and mental health services. Consequently, in 1987 Medicare paid less than one-half (45 percent) of the total health care expenditures for the elderly, but two-thirds of their hospital and physician costs (Waldo et al., 1989). Medicare spending amounted to roughly 18 percent of nursing home and home-care expenditures in 1993 (Wiener and Illston. 1996). Medicaid spending is primarily for long-term care services. In 1993, 62 percent of government spending for nursing home and home care for the elderly was accounted for by Medicaid (Wiener, Illston, and Hanley, 1994). Medicaid benefits include payment of Medicare Part B, and when applicable, Part A premiums, and cost-sharing for Medicare-covered services. Medicaid also provides certain acute-care benefits not available through Medicare, primarily prescription drugs, eye and dental care, and preventive and rehabilitative services. Generally, Medicaid benefits for the elderly are for the "categorically needy," those who meet the strict income and asset eligibility criteria of the Supplemental Security Income (SSI) program, the cash welfare program for the aged, blind, and disabled. In 1992, there were slightly fewer than 4 million "dual eligibles" (i.e., those who were both Medicare and Medicaid beneficiaries). In 1992, about 30 percent of Medicaid expenditures and 88 percent of Medicare expenditures were for the elderly (Coughlin, Ku, and Holahan, 1994).

5

The average annual premium for high-quality policies sold by the leading sellers in 1991 was $2,525 for people aged 65 and $7,675 for those aged 79 (Health Insurance Association of America, 1993).

6

Defined benefit plans provide actuarial benefits for retiring early; defined contribution plans do not. Defined contribution plans are actually savings accounts with tax advantages so they are age neutral with respect to retirement age (Quinn and Burkhauser, 1994).

7

An in-depth study of these issues is being conducted by the Committee on National Statistics Panel on Retirement Income Modeling. The panel was established to review the state of the art and make recommendations to inform policy making on retirement income security. The panel's work considers what data, research, and models exist and what are needed to estimate the short-run and long-run implications of current retirement-income-related policies and proposed changes to them. Products of the panel include an interim report published in July 1995 (Committee on National Statistics, 1995), a volume of commissioned papers published in August 1996 (Hanushek and Maritato, 1996), and the panel's final report (Citro and Hanushek, 1997).

8

Official poverty guidelines are based on the assumption that the elderly require fewer resources to maintain a suitable standard of living (see Citro and Michael, 1995). For instance, by the official 1994 definition, the poverty level was an annual income of $7,108 for a person aged 65 or older living alone and $8,967 for an older couple household; in contrast, the poverty line was an annual income of $7,710 for an adult aged 18 – 64 living alone and $9,976 for a nonelderly couple household (Bureau of the Census, 1996).

9

Perhaps an even more telling contrast is the economic status of children versus the elderly during the period from 1970 to 1990. The proportion of persons under 18 classified as poor increased from 15 percent in 1970 to 18 percent in 1980 to 21 percent in 1990.