...And That's Bad News For An Aging Population

Medical economists call the aging of the population a "ticking time bomb." As the chart shows, claims filed by employees to cover their own medical costs rise sharply as they grow older. On average, someone aged 55 to 59, for example, incurs medical costs that are 50% higher than someone 10 years younger and are more than double the average medical bills of someone in his or her late 30s.

Despite this effect, however, and despite the fact that the oldest baby boomers are approaching middle age, experts do not expect the demographic changes by themselves to have a large impact on medical outlays in the 1990s. Indeed, Health Care Financing Administration analysts think that they will account for less than 5% of the rise in outlays.

The reason: The age structure of the population will change very slowly over the next 10 years but far more dramatically over the next 20 to 30 years. The youngest baby boomers, for example, are entering their 30s, while the oldest are only starting to enter their mid-40s.

Thus, for now, the relentless aging of the population stands as a grim reminder of the need to bring rising health care costs under control before the baby boomers start retiring. Recent studies indicate that people 65 years of age and older spend an average of four times as much on health care as younger people.

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