We hear a great deal these days about Maine’s demographic winter, about our status as the oldest state in the nation, our diminishing supply of able-bodied workers and about our need to attract more young people to the state.

These concerns are valid, but focusing too much on what we don’t have risks ignoring policy adjustments we can make to reflect our demographic realities.

Consider the trends in Medicare. Between 2000 and 2006, the number of Maine citizens receiving Medicare benefits rose from about 216,000 to about 243,000, an increase of 12 percent. Over that same period, the value of those benefits – the actual payments made to medical providers – rose 90 percent, from about $1 billion to about $1.9 billion. As a result, the value of benefits per enrollee rose nearly 70 percent, from $4,700 to $8,000 per person.

Considering that total earnings of all Maine workers over that period increased only 30 percent, it is evident that the fiscal sustainability of the program was questionable – even remembering that Medicare is a federal program financed on national earnings. Clearly policy adjustments were called for.

Consider, then, the following six-year period – from 2006 to 2012. Medicare enrollment accelerated slightly, growing by 14 percent to about 276,000. Medicare payments, however, increased only 42 percent to about $2.8 billion.

This was less than half the 90 percent increase of the previous six-year period. As a result, payments per enrollee increased only 25 percent, to about $10,000. Policy adjustments had helped alter trends that, given purely demographic realities, seemed to doom us to a systemic collapse.

There were multiple reasons for this decline:

• Greater attention on the part of providers to health care costs as a result of regulations and financial incentives.

• More patient “skin in the game” through program options giving enrollees co-pays and deductibles.

• Declining overall age of the Medicare population as baby boomers became eligible in growing numbers.

• Growing benefits from advances in medical research and innovation in diagnosis, treatment procedures and devices and – at least possibly – growing general public attention to the behavioral changes necessary to continued good health.

In spite of these program adjustments, however, the fundamental economic realities got even worse during this second six-year period of our new century. Because of the Great Recession, total earnings for Maine workers over the 2006-to-2012 period increased only 9 percent – far less than the 42 percent increase in Medicare payments.

In short, the need for policy adjustments to our demographic realities is, if anything, more acute. We must proceed on multiple fronts.

• First, we must find ways to make it easier for those 65 years and older to remain in the workforce. Part-time jobs, job sharing, allowing seniors to remain eligible to participate in health savings accounts and expanding Medicare Advantage plans all would enable our current health system to adjust to the physical realities of a world not ruled by “all or nothing” retirement regulations.

• On the other side of the ledger, we must consider our health care infrastructure. Just as bridge collapses and water treatment failures make clear the catastrophic consequences of the failure to maintain our public transport, water-sewer, energy and even broadband infrastructure, so the growing fiscal burden of health care highlights our need to renew our commitment to investment in public health and medical innovation.

In 2014, public spending on health care as a share of Maine’s total wage and salary income stood at 21 percent, far above the national average of 14.9 percent. By this metric, Maine ranked sixth in the nation – behind only West Virginia, Mississippi, Arkansas, Kentucky and New Mexico.

In this context, whatever impact public investment in health and medical innovation and research has on improving health outcomes in Maine will save both state and federal taxpayers tens of millions or even hundreds of millions of dollars.

Charles Lawton is chief economist for Planning Decisions, Inc. He can be contacted at:

clawton@planningdecisions.com

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