Social Security Forecasts and the Future Health of the American Population

Jay Bhattacharya

NBER Disability Research Center Paper No. NB 13-03
Issued in October 2013

In this paper, using an updated version of the Future Elderly Model (FEM), we estimate how different assumptions about secular trends in mortality conditional on health status affect forecasted Social Security participation and expenditures. Our main findings are as follows: First, due to changes in health status alone, we project mortality rates to decline in the 51+ population until about 2025, and then rise sharply until about 2050. Second, the size of the American 51+ population will increase steadily throughout the coming decades, reaching a total of between 145 and 160 million people, depending on the assumptions used. Third, the age structure of the 51+ population will shift dramatically toward older ages, with the size of the 85+ population experiencing the sharpest growth. Fourth, diabetes, hypertension, stroke, heart disease and cancer prevalence will increase in the age 51+ population throughout the coming decades. Firth, the proportion of the age 51+ population claiming OASI will increase sharply, reaching a plateau in 2030; OASI expenditures, by contrast, will increase steadily through 2060, reaching between $1.5 trillion and $2 trillion in annual payouts. Sixth, the proportion of the age 51+ population claiming SSI will increase sharply until 2020, and then reach a plateau through 2060; SSI payments will increase steadily through 2060, reaching a level of about $50 billion per year for the 51+ population. Seventh, DI participation rates will fall sharply through 2030 and then plateau, while DI expenditures will rise to nearly $100 billion in expenditures for the 51+ population by 2060.

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