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    GAO Report on Retirement and Public Program Expenditures Relies on Schaeffer Center Research

    5/5/2016



    By Stephanie Hedt
     
    The Government Accountability Office (GAO) report titled, “Retirement Security: Shorter Life Expectancy Reduces Projected Lifetime Benefits for Lower Earners” (published March 2016) relied on work conducted by the Schaeffer Center for Health Policy & Economics as evidence of the effects of life expectancy trends on Social Security and Medicare benefits. 

    Life expectancy overall has increased in the United States over the last century. But, when income is considered, the gap in life expectancy between high- and low- income earners is widening. For example, according to a National Academy of Sciences (NAS) study published last year and referenced in the GAO report, the gap between high- and low-income works has grown almost seven years when comparing cohorts of men born in 1930 to those born in 1960. In 1930, a man in the highest income group could expect to live five years longer on average than those in the lowest income quintile. For men born in 1960, the gap widens to almost thirteen years. Though analysis of why this gap persists are well documented, the implications this trend has on public programs has not been as significantly investigated until recently. 

    The GAO report analyzes the implications of life expectancy trends for retirement planning and highlights the effect of changing life expectancy on available retirement resources for different income groups—especially individuals with low incomes. It also looked at popular policy proposals, for example raising the retirement age, and what impact these changes would have on public benefits, especially on different income groups. 

    Schaeffer Center Director Dana Goldman was on the NAS committee commissioned with producing the study used in the GAO report. Goldman and his colleagues found the widening life expectancy gap will have a substantial effect on the distribution of public program benefits received. Top earners are projected to receive substantially more lifetime benefits than workers in the lowest income bracket. 

    Furthermore, an earlier study by Goldman and Peter Orszag, which offered preliminary results from the investigation by the NAS committee, was also cited in the GAO report.  

    The Future Elderly Model, a demographic simulation model designed and maintained by researchers at the Roybal Center for Health Policy Simulation—a center within the Schaeffer Center—to explore changing trends in demographics and predict the future health status and resulting cost for older Americans, was the backbone of both studies co-authored by Goldman and colleagues and pointed to in the GAO report. 

    As the solvency of the Social Security program is challenged with the growth of the aging population, policy solutions aimed at addressing the financial challenges continue to be proposed. The report relied on the sound analysis of the Schaeffer Center and the robust modeling of the Future Elderly Model to suggest the proposals may impact subpopulations differently. “It is important that any proposals to change the Social Security program take into account how disparities in life expectancy affect the total benefits received by different groups over their lifetimes,” concludes the GAO report.  

    “The results suggest that the growing gradient in mortality rates by lifetime income and education can have a first-order effect on the lifetime progressivity of Social Security and Medicare benefits,” wrote Goldman and Orszag in their study