Thomas Reifert

An Aging Population and Aging Policies

ECO 101-001

Thomas Reifert
University of Kentucky
October 26th, 2015

References
Social Security. (n.d.). Retrieved October 25, 2015, from
https://www.ssa.gov/news/press/basicfact.html
Issues Facing America: Medicare. (n.d.). Retrieved October 25, 2015, from
http://www.aaos.org/news/aaosnow/aug08/reimbursement1.asp
Social Security Payroll Tax Threshold Unchanged for 2016; a payroll-adjustment reprieve.
(n.d.). Retrieved October 25, 2015, from
http://www.shrm.org/hrdisciplines/compensation/articles/pages/fica-social-security-tax2016.aspx
Introduction

Thomas Reifert

An Aging Population and Aging Policies

ECO 101-001

In the year 2050 in the United States, where the average life span has just reached 100
years old, new economic issues arise as people continue to live longer than ever before. One
major economic issue that the government in the United States will need to address is over
population as it pertains to Social Security benefits. As more people age and reach the retirement
age, (currently 65) they will start collecting Social Security benefits and as this happens and the
general amount of money paid out by the government will be more than collected. However,
another issue that might arise is Medicare. The elderly tend to have a high income inequality, and
while the majority tend to be wealthy, those who are not often fall below the poverty line. Those
below the poverty line often cant afford health insurance, a necessity to the elderly population
and as the shift of people below retirement to above retirement age increases this will put more
of a strain on the Medicare system.

Impacts on Social Security Benefits

As previously stated above, Social Security benefits will be collected by more people as
the population continues its upward trend. Through 2015 the United States has paid out 53
billion dollars to retired workers (Social Security Administration, 2015). Even more frightening
than this is the fact that the amount of people paying in versus collecting from Social Security is
on the decline. By 2035, the number of older Americans will increase from 48 million today to
79 million. There are currently 2.8 workers for each Social Security beneficiary. By 2035, there
will be 2.1 workers for each beneficiary, (Social Security Administration, 2015). This will be

Thomas Reifert

An Aging Population and Aging Policies

ECO 101-001

even more exacerbated by 2050, as the population curve shifts and the average of the United
States population ages.
This issue could be resolved through the increase of Social Security taxes. However, due
to the fact that salaries only increase at roughly 2-3% a year only combating inflation, the
increase in Social Security taxes pose a strain on the economy and average person. One possible
option in place of social security is a different aid service that is more individualized. Instead of
everyone paying into a pot and getting out a certain amount of what they put in later in life, the
system could be catered to the individual. With new technology everyday and incredible amounts
of data collection happening through the government it is not an unheard of thought that your
finances be more closely monitored. The government could have a file that shows how much you
earn yearly, and how much you contribute. Based on projections it could determine your payout
after you retire and how much you put in determines how much you get back.
This system also has some drawbacks through, as it contributes to restricted opportunity;
the idea that people below the poverty line are there because of lack of possibilities. If people
below the poverty threshold have to pay in a lot to get back as much, then their present income
will hold back their future earnings after they retire. This could be adjusted to be percentage
based under a certain income level in order to offset income inequality. This system I believe
could be implemented and fix the issues with Social Security that stems from a poor ratio of
workers to beneficiaries.

Medicare and Budget Costs

Thomas Reifert

An Aging Population and Aging Policies

ECO 101-001

Medicare, a government insurance program for elderly people over 65 is often the
elderlys primary form of health insurance, especially those below the poverty threshold. It
ranges from hospital visits, and nursing, to third party management and prescription drugs. Every
year the United States government budgets an estimated 432 billion dollars on Medicare which is
just over 3% of the United States GDP (American Academy of Orthopedic Surgeons, 2015). This
large amount is just dedicated to the health care segment for elderly members is funded majorly
through medicare taxes which seem to increase every year.
Taxes, the governments favorite way to pay for things, will continue to see an upward
trend as long as this policy is overburdened by an increased life span. Medicare taxes, which are
currently 2.9% (1.45% if not self employed) are set to stay the same through 2016 (Society for
Human Resource Management, 2015). However, given the scenario of 2050 and a much higher
average life span it can be assumed that more people will be collecting Medicare, while roughly
the same amount pay in. This would make it necessary for the raising of the tax in order for the
continuation of funding.
This problem in its self is also the solution, where Social Security seemed a flawed policy
that would eventually need to be usurped and replaced, Medicare taxes are low enough that they
can raise the tax on them in order to combat this issue. While raising taxes are often a temporary
and highly controversial solution, a higher flat rate tax increased gradually over several years is
not as damaging as a sudden tax spike and would be manageable for the majority of the
population of the United States.

Conclusion

Thomas Reifert

An Aging Population and Aging Policies

ECO 101-001

The United States aging population complemented by the highest average life span seen
in 2050, brings with it many issues. The two addressed here are Social Security benefits and
Medicare and budget costs. These both pertain mainly to the idea that the population curve shifts
towards a much higher average age with people living and collecting retirement benefits for
much longer periods of time. In addition more people will be collecting them in general. The
solution presented for Social Security benefits was a new system using new technology to
efficiently track what people put in and pays out accordingly, where as the solution for Medicare
was the increases in medicare taxes in order to compensate for the increase in people being paid
out. These new solutions will stand to help solve the potential population crisis of an average 100
year life span compared to the soon to be outdated policies of today.