FIGURE 9-2  Alternative projections of Medicare spending, 2011–2050. SOURCE: Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (2011).

GDP in 2011 to 6 percent by 2050. Under the CBO alternative (which is similar to the Trustees alternative), Medicare spending in 2050 reaches 7.5 percent of GDP. The anticipated slowdown in health spending is important to these projections; under the assumption of no slowdown in excess cost growth, Medicare spending reaches over 10 percent of GDP by 2050.

Medicaid and Other Health Programs

Medicaid, a program that is financed in part by the federal government and in part by the states, is not an old-age program, yet it plays an important part in financing the long-term care needs of the elderly. In 2004, for example, Medicaid financed about one-third of long-term care services for the elderly (O’Brien, 2005), and in 2007 these services represented 14 percent of Medicaid expenditures (Centers for Medicare and Medicaid Services, 2011a). Table 9-2 shows the distribution of Medicaid spending by age in 2004. Per capita Medicaid spending is highest for those 75–84 and over 85, a reflection of the increased utilization and high cost of nursing home care.

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