How Boomers Will Impact the Health Care Industry
As the first wave of Baby Boomers reaches retirement age, predictions for the nation’s health care system have been nothing short of apocalyptic.
Many predict the surge in demand for medical care associated with the aging population will so strain our resources that future generations will face permanently higher inflation, higher taxes – or both.
Some suggest the rising cost of Medicare, the federal insurance plan for those aged 65 and older, will drive the national debt to a point of no return.
And still others have suggested that cost pressures could ultimately result in reduced health benefits for all – or a reallocation of benefits in which higher-income people receive less coverage.
Though dire, such speculation is not without merit.
At 78 million strong, the oldest of the Boomers – born between 1946 and 1964 – are already making unsustainable demands on federal entitlement programs -- Medicare and Medicaid.
In its Long-Term Outlook for Medicare, Medicaid and Total Health Care Spending, the Congressional Budget Office (CBO) reports that spending for those programs will account for 3 percent each of gross domestic product (GDP) in 2009.
By 2035, in the absence of change, spending for Medicare alone (which is more likely to be impacted by aging Boomers) will have more than doubled to 8 percent, and by 2080 it will have grown to 15 percent.
THE ME GENERATION
Part of the challenge, of course, is that the post-war Boomer generation simply spends more on health care than their parents did.
They visit the doctor more, they consume more services, and they aren’t afraid to use their $7 trillion in collective wealth to improve their quality of life.
From physical therapy, to cosmetic surgery, to the latest in life-saving technology, Boomers just aren’t built to grow old gracefully.
BOOMERS AREN’T THE PROBLEM
Yet, for all the finger pointing by younger taxpayers who are footing the Medicare bill, researchers insist it’s not just the Boomers to blame.
While the aging population may contribute to the healthcare crisis, it’s the emergence of costly new drugs, diagnostics and medical technologies that created it, says David Cutler, professor of economics at Harvard University.
“The biggest hurdle for health care spending is that everyone spends more at every age whether you’re 50 or 2, and that will continue” he says.
A good example? Stenting, in which surgeons insert a mesh tube into narrowed or weakened arteries.
“That procedure was originally developed for a small number of people who needed it, but now it’s given prophylactically,” says Cutler. “The aging population is not by itself the only problem we face.”
Indeed, the CBO’s report shows the impact of the Boomers starts to wane after 2035, but healthcare spending per capita will continue to climb for the next 45 years.
“In the health care field, unlike most sectors of the economy, technological advances generally raise costs rather than lower them because they increase the demand for services,” the report states. “Widely available health insurance coverage – both public and private – means that individual consumers have little incentive to restrict their consumption of services, because the price they face is far lower than the cost of providing the service.”
Jonathan Skinner, economics professor at Dartmouth Institute, agrees.
“Baby Boomers are playing a supporting role here, but it’s really a perfect storm,” he says. “We’ve got higher technology costs, spending growth and a much larger number of people for whom spending will continue to grow.”
CAN IT BE FIXED?
The White House, of course, has made health care spending a matter of national priority, with an eye towards reigning in costs while providing coverage for all Americans.
Though details of the health care reform bill are still being hammered out, Cutler says he believes the incentives most versions provide for keeping people healthy would go a long way towards cutting costs down to size.
“There are opportunities to save 30 percent to 50 percent on spending so we need to concentrate on getting more bang for the buck,” he says. “I think the reform bills before Congress would do that.”
Ironically, while Baby Boomers are on track to bust the federal budget, their greatest legacy in the end might just be the health care innovation they leave behind.
Demand from the largest demographic in American history is prompting pharmaceutical firms to develop new drugs for aches and pains at breakneck speed.
Medical device manufacturers are unveiling better technology every year to help keep patients healthy, and solo practitioners are slowly being replaced by teams of specialists (surgeons, physical therapists, cardiologists, etc.) in the race to improve both patient outcomes and
continuity of care.
“It would be a wonderful legacy for the Boomer generation to hand over a Social Security and health care system that’s been fixed in a way that doesn’t bankrupt the rest of the country,” says Skinner.
The generation that protested the Vietnam War, witnessed the assassination of President John F. Kennedy and watched Americans land on the moon, are not likely to settle for less.
“Baby Boomers will soon discover how haphazard the U.S. health care system really is when they need it, from coordinating care, to seeing different specialists to obtaining drugs,” says Cutler. “They’re already finding that with their parents and they won’t put up with it for themselves. They have the money and the voice to effect change.”
Watch "Tom Brokaw Reports: Boomer$!", Thursday, March 4 at 9pm ET on CNBC. The program will also air Saturday, March 6 at 7pm ET; Sunday, March 7th at 9pm ET; and Monday, March 8th at 8pm ET.