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Unless otherwise specified, all years in this report are calendar years. Numbers in the text and tables may not add to totals because of rounding. Data from the national income and product accounts (NIPAs)
for 1997 are consistent with CBO's economic forecast presented in The
Economic and Budget Outlook: Fiscal Years 1999-2008 (January 1998).
That forecast was prepared before the advance estimates of gross domestic
product and its components for 1997 were released on January 30, 1998.
Some of the information in this publication was updated December 1999. See The Long-Term Budget Outlook: An Update |
The Congress has been concerned for some time about the impact that the continuing growth of per-enrollee health costs and the upcoming retirement of the large baby-boom generation will have on the federal budget. Those two factors will place growing pressure on the budget, largely because they will increase spending on Social Security, Medicare, and other programs that serve the elderly.
For the past two years, the Congressional Budget Office (CBO) has prepared reports on the long-term budgetary outlook and some of the policy options for controlling the growth of Social Security and Medicare spending. The current report updates those earlier reports. In accordance with CBO's mandate to provide objective and impartial analysis, it contains no recommendations.
The long-term projections presented in Chapters 1, 2, and 5 were prepared by CBO's Macroeconomic Analysis Division under the supervision of Robert Dennis and Douglas Hamilton. John Sturrock wrote Chapter 1, and Benjamin Page wrote Chapter 2. Douglas Hamilton and Benjamin Page prepared Chapter 5. Benjamin Page carried out the macroeconomic modeling in those chapters. Paul Diller and Michael Simpson provided research assistance.
The analysis of the policy options for Social Security and Medicare in Chapters 3 and 4 was prepared by CBO's Health and Human Resources Division under the supervision of Joseph Antos. Ralph Smith wrote Chapter 3, and Sandra Christensen wrote Chapter 4. The long-term Social Security estimates in Chapter 3 were made by the Office of the Actuary in the Social Security Administration. Sandra Christensen prepared the long-term Medicare estimates in Chapter 4. Box 1-2 was prepared by Julia Matson, and Box 4-1 was written by Linda Bilheimer. Douglas Hamilton, Ralph Smith, and Sandra Christensen prepared the summary.
Sherry Snyder supervised the editing of the report, and Kathryn Quattrone supervised production. Major portions were edited by Sherry Snyder, Melissa Burman, Leah Mazade, and Christian Spoor. Sharon Corbin-Jallow, Linda Lewis Harris, and Ron Moore assisted in producing sections of the report. Kathryn Quattrone prepared the report for publication, with assistance from Martina Wojak-Piotrow. Laurie Brown prepared the electronic version for CBO's World Wide Web site.
June E. O'Neill
Director
May 1998
TWO - THE LONG-TERM BUDGET OUTLOOK
THREE - SLOWING THE GROWTH IN SOCIAL SECURITY
FOUR - SLOWING THE GROWTH IN MEDICARE
FIVE - THE LONG-TERM IMPACT OF OPTIONS FOR SOCIAL SECURITY AND MEDICARE
| TABLES | |
| S-1. | Population of the United States by Age, Calendar Years 1950-2070 |
| S-2. | Projections of Federal Receipts and Expenditures Under CBO's Base Scenario, 1997-2050 |
| S-3. | Effects of Illustrative Options for Reducing Growth in Spending for Social Security |
| S-4. | Effects of Illustrative Options for Reducing Growth in Net Spending for Medicare |
| 1-1. | Population of the United States by Age, Calendar Years 1950-2070 |
| 1-2. | Comparison of Projected Dependency Ratios |
| 1-3. | Fertility Rates by Age |
| 1-4. | Past Average Annual Changes in Age-Specific Death Rates |
| 1-5. | Projected Average Annual Changes in Age-Specific Death Rates |
| 1-6. | Average Annual Rates of Growth in Federal Payments for Medicare and Medicaid |
| 1-7. | Federal Outlays and Receipts |
| 2-1. | Projections of Federal Receipts and Expenditures Under CBO's Base Scenario, 1997-2050 |
| 2-2. | Changes in the Fiscal Gap Since 1997 |
| 2-3. | The Fiscal Gap Under Various Assumptions |
| 2-4. | Projections of Federal Receipts and Expenditures Without Economic Feedbacks, 1997-2050 |
| 3-1. | Increases in Normal Retirement Age Under Current Law and Two Illustrative Options |
| 4-1. | Medicare Enrollment and Spending, 1975-1995 |
| 4-2. | Medicare Enrollment and Spending Projected to 2070, Under Current Law |
| 4-3. | Medicare Enrollment and Spending Projected to 2070, Assuming That the Age of Eligibility Is Raised |
| 4-4. | Medicare Enrollment and Spending Projected to 2070, Assuming That Collections from Enrollees Are Increased to Cover 50 Percent of SMI Costs Starting in 2000 |
| 4-5. | Medicare Enrollment and Spending Projected to 2070, Assuming an Annual Increase of 4 Percent in Medicare's Defined Contribution After 2000 |
| 4-6. | Effects of Illustrative Options for Reducing Growth in Net Spending for Medicare |
| 5-1. | The Fiscal Gap Under Various Options for Social Security |
| 5-2. | The Fiscal Gap Under Various Options for Medicare |
| 5-3. | The Fiscal Gap Under Various Policy Packages |
| FIGURES | |
| S-1. | Long-Term Projections of Federal Debt |
| S-2. | Projected Growth in Spending for Social Security and Medicare, Calendar Years 1995-2070 |
| 1-1. | The 65-Plus Dependency Ratio |
| 1-2. | Growth in Work-Hours |
| 1-3. | Births in the United States, 1909-1994 |
| 1-4. | High and Low Projections of the 65-Plus Dependency Ratio |
| 2-1. | Long-Term Projections of Federal Debt Compared with Historical Levels |
| 2-2. | The Ratio of Debt to GDP Under CBO's 1997 and 1998 Base Scenarios |
| 2-3. | The Ratio of Debt to GDP With and Without Budget Surpluses Through 2008 |
| 2-4. | The Ratio of Debt to GDP Under Various Assumptions |
| 3-1. | Primary Insurance Amounts in Relation to Average Indexed Monthly Earnings Under Current Law for Workers Who Turned 62 in 1997 |
| 3-2. | Illustrative Options for Reducing Growth in Social Security Outlays |
| 4-1. | Net Medicare Spending as a Percentage of GDP Under Alternative Options |
| 4-2. | Medicare Premiums as a Percentage of Enrollee Income Under Alternative Options |
| BOXES | |
| 1-1. | How Will Aging Populations Affect Government Budgets in Other Industrial Countries? |
| 1-2. | Could a Reduction in Children's Share of the Population Substantially Ease the Pressure on Government Budgets? |
| 2-1. | A Statistical Analysis of the Long-Term Outlook Using Alternative Assumptions About Productivity and Demographics |
| 3-1. | The Advisory Council's Plans for Balancing the Trust Funds |
| 4-1. | The Outlook for Medicaid and Long-Term Care Spending |
| 4-2. | Medicaid Supplements to Medicare |
