THE GROWING GAP IN
LIFE EXPECTANCY BY INCOME
IMPLICATIONS FOR FEDERAL PROGRAMS
AND POLICY RESPONSES
Committee on the Long-Run Macroeconomic Effects of
the Aging U.S. Population—Phase II
Committee on Population
Division of Behavioral and Social Sciences and Education
and
Board on Mathematical Sciences and Their Applications
Division on Engineering and Physical Sciences
THE NATIONAL ACADEMIES PRESS
Washington, D.C.
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Suggested citation: National Academies of Sciences, Engineering, and Medicine. (2015). The Growing Gap in Life Expectancy by Income: Implications for Federal Programs and Policy Responses. Committee on the Long-Run Macroeconomic Effects of the Aging U.S. Population-Phase II. Committee on Population, Division of Behavioral and Social Sciences and Education. Board on Mathematical Sciences and Their Applications, Division on Engineering and Physical Sciences. Washington, DC: The National Academies Press.
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COMMITTEE ON THE LONG-RUN MACROECONOMIC
EFFECTS OF THE AGING U.S. POPULATION-PHASE II
RONALD LEE (Cochair), Department of Demography and Center on the Economics and Demography of Aging, University of California, Berkeley
PETER R. ORSZAG (Cochair), Global Banking, Citigroup
ALAN J. AUERBACH, Economics Department and Burch Center for Tax Policy and Public Finance, University of California, Berkeley
KERWIN K. CHARLES, University of Chicago Harris School of Public Policy and National Bureau of Economic Research
COURTNEY C. COILE, Department of Economics, Wellesley College, and National Bureau of Economic Research
WILLIAM GALE, Economic Studies Program, Brookings Institution
DANA P. GOLDMAN, Schaeffer Center for Health Policy and Economics, University of Southern California
CHARLES M. LUCAS, Osprey Point Consulting
LOUISE M. SHEINER, Economic Studies Program, Brookings Institution
DAVID N. WEIL, Department of Economics, Brown University
JUSTIN WOLFERS, Department of Economics and Public Policy, University of Michigan
REBECA WONG, Sealy Center on Aging, University of Texas Medical Branch
KEVIN KINSELLA, Staff Director
COMMITTEE ON POPULATION
2015
KATHLEEN MULLAN HARRIS (Chair), Department of Sociology, University of North Carolina at Chapel Hill
JERE R. BEHRMAN, Department of Economics, University of Pennsylvania
VICKI A. FREEDMAN, Institute for Social Research, University of Michigan
MARK D. HAYWARD, Population Research Center, University of Texas at Austin
HILLARD S. KAPLAN, Department of Anthropology, University of New Mexico
SARA S. MCLANAHAN, Center for Research on Child Wellbeing, Princeton University
EMILIO A. PARRADO, Department of Sociology, University of Pennsylvania
DAVID R. WEIR, Survey Research Center, Institute for Social Research, University of Michigan
JOHN R. WILMOTH, Population Division/DESA, United Nations
THOMAS J. PLEWES, Director
TINA M. LATIMER, Program Coordinator
BOARD ON MATHEMATICAL SCIENCES
AND THEIR APPLICATIONS
2015
DONALD G. SAARI (Chair), Departments of Mathematics and Economics, University of California, Irvine
DONALD ARNOLD, School of Mathematics, University of Minnesota
JOHN B. BELL, Center for Computational Sciences and Engineering, Lawrence Berkeley National Laboratory
VICKI BIER, Industrial and Systems Engineering, University of Wisconsin
JOHN R. BIRGE, Booth School of Business, University of Chicago
L. ANTHONY COX, JR., Cox Associates
MARK L. GREEN, Department of Mathematics, University of California, Los Angeles
BRYNA KRA, Department of Mathematics, Northwestern University
JOSEPH A. LANGSAM, Morgan Stanley (retired)
ANDREW LO, Sloan School of Management, Massachusetts Institute of Technology
DAVID MAIER, Computer Science Department, Portland State University
WILLIAM A. MASSEY, Department of Operations Research and Financial Engineering, Princeton University
JUAN MEZA, School of Natural Science, University of California, Merced
CLAUDIA M. NEUHAUSER, Informatics Institute, University of Minnesota
FRED ROBERTS, DHS Center of Excellence, Rutgers University
GUILLERMO SAPIRO, Department of Electrical and Computer Engineering, Duke University
CARL P. SIMON, Ford School of Public Policy, University of Michigan
KATEPALLI SREENIVASAN, Polytechnic Institute, New York University
ELIZABETH A. THOMPSON, Department of Statistics, University of Washington
SCOTT T. WEIDMAN, Director
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Preface
In 2010, Congress asked the National Research Council (NRC), the operating arm of the National Academy of Sciences, to undertake a study of the long-run macroeconomic effects of the aging U.S. population. This study was divided into two phases. Phase I began in September 2010 and culminated in the 2012 report Aging and the Macroeconomy: Long-Term Implications of an Older Population (National Research Council, 2012), which summarized existing knowledge in relevant domains, discussed various policy implications, and offered a set of research recommendations.
In the course of the Phase I work, it became clear that a useful next step would be to further consider the policy implications of certain macro-level changes in the U.S. population through the use of quantitative modeling and projections. To do so, the NRC appointed an ad hoc Phase II committee in late 2012 under the auspices of the NRC’s Committee on Population and the Board on Mathematical Sciences and their Applications. The Phase II committee investigated the steepening U.S. mortality gradient by income and focused on the intersection of mortality changes and government entitlement programs, with an eye toward potential policy responses that would help programs meet the fiscal challenges posed by an aging population.
No committee could perform a task such as this without the assistance and close cooperation of many people. We would like to thank, first and foremost, our fellow committee members. Despite having many other responsibilities, committee members generously donated their time and expertise to the project. The committee met six times over the course of the project. Members contributed to the study by providing background
readings, leading discussions, making presentations, drafting and revising chapters, and critically commenting on the various report drafts. The perspectives that members brought to the table were instrumental in synthesizing ideas throughout the committee process.
Several members of the Phase I committee provided valuable comments regarding the direction of the Phase II project. For their suggestions, we thank Axel Boersch-Supan, Max Planck Institute for Social Law and Social Policy; Deborah J. Lucas, Massachusetts Institute of Technology; William D. Nordhaus, Yale University; and James M. Poterba, Massachusetts Institute of Technology.
We very much appreciate the ideas and research of scholars who are working on issues that the committee examined. For their presentations and/or related input to the committee, we thank Barry P. Bosworth, Brookings Institution; Joyce Manchester, Congressional Budget Office; Samuel Preston, University of Pennsylvania; and Hilary Waldron, Social Security Administration.
An integral part of this project involved modifications to the Future Elderly Model and the subsequent production of data and graphs. This was a collaborative enterprise in which committee members worked with Bryan Tysinger and Duncan Leaf, Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, whose sustained efforts were indispensable. We also thank Jeffrey Sullivan, Precision Health Economics, for his valuable input during early stages of the project, and Gretchen S. Donehower, Center on the Economics and Demography of Aging, University of California, Berkeley, for producing analyses used in Chapter 3.
This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies of Sciences, Engineering, and Medicine’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. We thank the following individuals for their review of this report: Sandro Galea, Department of Epidemiology, Mailman School of Public Health, Columbia University; James S. House, Institute for Social Research, University of Michigan; Laurence J. Kotlikoff, Department of Economics, Boston University; Alicia H. Munnell, Carroll School of Management and Center for Retirement Research, Boston College; Samuel H. Preston, Population Studies Center, University of Pennsylvania; Jonathan S. Skinner, Department of Economics, Dartmouth University; Bruce D. Spencer, Department
of Statistics, Northwestern University; Wilbert van der Klaauw, Center for Microeconomic Data, Research and Statistics, Federal Reserve Bank of New York; and James W. Vaupel, Max Planck Institute for Demographic Research, Rostock, Germany.
Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the conclusions or recommendations nor did they see the final draft of the report before its release. The review of this report was overseen by V. Joseph Hotz, Department of Economics, Duke University, and Charles F. Manski, Department of Economics, Northwestern University. Appointed by the Academies, they were responsible for ensuring that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content rests entirely with the authoring committee and the institution.
Lastly, we acknowledge the efforts of several individuals within the Academies. We are indebted to Danielle Johnson, senior program assistant, for providing the essential infrastructure for this project. Danielle handled many administrative matters during the committee’s tenure, with assistance from Barbara Boyd and Tina Latimer. Mary Ghitelman was instrumental in preparing the final graphs throughout the report. We also thank Kirsten Sampson Snyder for her coordination of the review process and Robert J. Katt, who edited the volume and made numerous suggestions for its improvement. Kevin Kinsella, the Academies study director, managed the overall work of the committee, along with Thomas Plewes, director of the Committee on Population, and Scott Weidman, director of the Board on Mathematical Sciences and Their Applications.
Ronald D. Lee and Peter R. Orszag, Cochairs
Committee on the Long-Run Macroeconomic Effects of
the Aging U.S. Population—Phase II
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Contents
2 POPULATION AGING IN A HETEROGENEOUS SOCIETY
Population Aging in the United States
Why Population Aging Has Important Economic Consequences
Individual Heterogeneity in an Aging Population
3 GROWING HETEROGENEITY OF THE U.S. POPULATION IN INCOME AND LIFE EXPECTANCY
Shift in the Mortality Gradient and Underlying Causes
Uncertainty of the Mortality Projections
4 IMPLICATIONS OF GROWING HETEROGENEITY
Implications of Growing Heterogeneity for Social Security
Effects of Differential Mortality on Benefit Claiming and Retirement Incentives
The Distribution of Social Security Benefits
The Distribution of Medicare Benefits
The Distribution of Medicaid Benefits
Sensitivity of Results to Mortality Change
5 POLICY RESPONSES TO AN AGING POPULATION
Social Security Policy Simulations
A Medicare Policy Simulation: Raising the Eligibility Age for Medicare
Summary of Results from the Policy Simulations
Annex to Chapter 5: The Committee’s Retirement Model
A Biographical Sketches of Committee Members
B The Future Elderly Model: Technical Documentation1
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1Appendix B and the accompanying Excel workbook are not printed in this volume. Both are available to download at nap.edu/GrowingGap under the Resources tab.