With Increasing Aging Population, Study Advises Policy Changes
Connie K. Ho for redOrbit.com – Your Universe Online
A study from the National Academies recently revealed that major policy changes are needed to deal with the aging population in the United States and the long-term impact that they will have on the economy.
Researchers noted that the economic consequences of the growing aging population will affect younger generations as well as the various federal programs that provide aid to the elderly. They believe that the increasing demographic shift to people over the age of 65 is not temporary and not related to only the baby boomer population; researchers note that the trend will continue to be seen in later decades. The National Academies is made up of members of the National Academy of Sciences, the National Academy of Engineering, the Institute of Medicine and the National Research Council.
“The bottom line is that the nation has many good options for responding to population aging,” remarked Roger Ferguson, a co-chair of the committee that completed the report, in a prepared statement. “Nonetheless, there is little doubt that there will need to be major changes in the structure of federal programs, particularly those for health. The transition to sustainable policies will be smoother and less costly if steps are taken sooner rather than later.”
The report also stated that programs like Medicare, Medicaid and Social Security are unsustainable with their current rate of expenditure. The total cost of the three programs is approximately 40 percent of all federal spending and 10 percent of the country’s gross domestic product. In the future, the researchers believe that there will be more beneficiaries of these programs due to the results of longer life expectancy and reduced birth rates. However, there will be significantly less workers who can contribute to the programs and support the expenditures in the next few decades. The increasing aging demographic along with the increases in health care costs will continue to elevate health care expenditures and require more of the national resources.
As such, the researchers recommend that policy makers consider how costs and policies can be adapted to consider future generations who will have to bear the burdens of these federal programs. A number of discussions have been initiated on the issue, but the results of these conversations are still unclear. The researchers believe that the response by the public will include more saving during working years, structural changes to programs that are publicly supported, and older retirement ages.
“The nation needs to rethink its outlook and policies on working and retirement,” explained committee co-chair Ronald Lee, who serves as a professor of demography and economics at the University of California, Berkeley, in the statement. “Although 65 has conventionally been considered a normal retirement age, it is an increasingly obsolete threshold for defining old age and for setting benefits for the elderly.”
In addition, the report advised workers to prepare for retirement by planning early and adjusting the way they save or spend money. They also advised individuals to learn how to have better money management. According to the researchers, one-fifth to two-thirds of the elderly currently have not saved enough for retirement and depend much on Medicare and Social Security.
“Population aging does not pose an insurmountable challenge provided that sensible policies are implemented with enough lead time to allow people, companies, and other institutions to respond,” continued Ferguson in the statement.
The issues of an increasing aging population are not only seen in the U.S., as other industrialized countries are grappling with the difficulties The report cautioned that, if the U.S. does not take action, the staggering costs of health care can have rippling effects around the world. Researchers from the National Research Council plan to conduct a follow-up study to analyze the long-term macroeconomic effects of the aging population and to provide assessments on various policy options.