The Growing Gap in Life Expectancy by Income Implications for Federal Programs and Policy Responses (2015) / Chapter Skim
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We go on to evaluate the way that the widening income differences in mortality affect the value of net lifetime benefits for different income groups from Social Security retirement and spousal benefits, Disability Insurance, Survivors Insurance, Medicare, Medicaid, and Supplemental Security Income. Finally, we consider how the differential changes in mortality would affect analyses of some possible reforms to government programs for the elderly in the face of population aging.
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The analysis presented here examines the impact of a steeper mortality gradient by income on the major federal entitlement programs: Medicare, Medicaid, Social Security retirement, Disability Insurance, and Supplemental Security Income. The results show a considerable change in the overall distribution of these government benefits, driven by the growing gap in life expectancy by income and education.
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The gap, though, is estimated to have risen substantially since then because life expectancy of generations at the bottom of the earnings distribution is relatively flat or even declining, whereas life expectancy is rising rapidly at the top. For example, consider male workers in the bottom fifth of lifetime earnings.
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The result is that the gap in life expectancy between high-earning females and low-earning females is projected to expand from 4 years to 13.6 years. IMPACT OF GROWING GAP IN LIFE EXPECTANCY ON BENEFITS FROM MAJOR ENTITLEMENT PROGRAMS Given these substantial increases in projected life expectancy differentials, it is not surprising that the committee's estimates also suggest a
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. The simulations perform a hypothetical experiment examining the impact of changing mortality on lifetime benefits, assuming that the policy parameters for those programs are fixed at their current levels (2010 for program structures)
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The overall picture is one of relative neutrality across the earnings distribution. As discussed in Chapter 4, this pattern arises from a balance between Social Security retirement benefits (which were larger in absolute dollar amounts for higher earners than lower earners)
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at Age 50, by Sex, for People Under the Mortality Regimes of the 1930 and 1960 Birth Cohorts Present value of net benefits at age 50 based on the mortality profile for those Earnings Quintile Born in 1930 Born in 1960 Males Lowest $319,000 $310,000 2 246,000 266,000 3 217,000 301,000 4 202,000 331,000 Highest 189,000 306,000 Gap, High-Low −$130,000 −$4,000 Ratio, High/Low 0.59 0.99 Females Lowest $487,000 $402,000 2 341,000 310,000 3 296,000 290,000 4 251,000 236,000 Highest 240,000 310,000 Gap, High-Low −$247,000 −$92,000 Ratio, High/Low 0.49 0.77
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From page 8... ...
First, the preceding discussion focused mostly on the top versus the bottom quintile. TABLE S-3 Present Value of Net Benefits as a Share of Present Value of Inclusive Wealth Present value of net benefits at age 50, relative to inclusive wealth, based on the mortality profile for those Earnings Born in 1930 Born in 1960 Percentage Point Quintile (%)
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From page 9... ...
That pattern is also reflected in the present value of net benefits also. Second, the increased gaps in the present value of net benefits are driven primarily by Social Security (where the absolute level of present value dollars for top earners is projected to rise significantly relative to bottom earners)
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In summary, the report finds that the United States is experiencing a substantial widening of differences in life expectancy at age 50 by lifetime earnings. According to the model and projections used for the analyses, these gaps will, in turn, exert a substantial influence on the pattern of lifetime benefits under programs such as Medicare, Medicaid, and Social Security.
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