Elderly Health and Longevity in the US: Evidence and Implications

Liran Einav and Amy Finkelstein

No 35346, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Rising elderly life expectancy is a well-known source of fiscal pressure on Social Security and Medicare – but how have declining mortality and morbidity affected the two programs’ relative finances? Using nearly three decades of Medicare Current Beneficiary Survey data (1992-2019), we estimate that these demographic changes raised expected lifetime Social Security spending by over twice as much as expected lifetime Medicare spending: 14% compared to 6%. The slower growth of elderly lifetime health care spending than annuity spending reflects two features of how longevity has increased: the additional 2.4 years of remaining life expectancy were entirely healthy – free of physical or cognitive limitations – while the expected amount of time spent with severe health limitations fell by about 30%, reducing expected lifetime nursing-home and home-health use. We then write down a stylized life-cycle model of a risk-averse retiree facing stochastic mortality and health to illuminate the key forces that affect the optimal allocation of a fixed amount of public funds across Medicare and Social Security.

JEL-codes: H51 H55 I1 J14 (search for similar items in EconPapers)
Date: 2026-06
Note: AG EH PE
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