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Trends in Aging Economics of Aging and Health Care: Benefits and Challenges of an Aging Population

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Title: Trends in Aging Economics of Aging and Health Care: Benefits and Challenges of an Aging Population


1
Trends in AgingEconomics of Aging and Health
Care Benefits and Challenges of an Aging
Population
  • Larry Polivka, Ph.D.
  • SCAN Meeting
  • Sarasota, FL
  • February 22, 2007

2
Cost Effectiveness of Health CareInnovations
Since 1950
  • Heart disease care/reduced mortality (50 since
    1970)
  • The cost of care for heart disease is now 5,000
    for each additional year of life/50,000 in 1980
  • But, the cost of health care innovations/
    biomedical technology will continue to drive up
    health care costs at 2/3 times CPI
  • The overall cost of health care for each
    additional year of life is about 60,000 for
    under 65 and 150,000 for 65 (D. Cutler)

3
Cost Effectiveness of Health Care (contd)
  • Is this a problem? What happens if health care
    becomes 25 of the economy?
  • What is wrong with a huge health care sector if
    overall health status continues to improve and
    the overall economy continues to grow?
  • Florida benefits considerably from a large
    retiree population and a growing health care
    sectortourism, agriculture, health care

4
Economic Benefits to Florida
  • Retirees pour more than 4/5 times as much into
    the Florida economy (purchases, taxes, fees) as
    they consume in publicly supported health care
    and social services (Fishkind, 2000).
  • Floridas retirees are generally healthier and
    more affluent than the national average.
  • They represent a very substantial pool of
    volunteers and workers (part-time, full-time).
  • Employers need to be flexible to take advantage
    of this labor pool, which has potential to reduce
    future labor shortages.
  • Employers also need to be aware of the caregiving
    (for older relatives) obligations of their older
    and younger workers.

5
Costs Now and in the Future
  • The aging of the population is not nearly
    (15-20) as important a health care cost factor
    as technological innovations, except for
    long-term care
  • But, rising health care costs are a major concern
    for many older persons who now spend 22 of
    income for medical care (10 in 1988)
  • This is projected to rise to 35/40 by 2030

6
Costs Now and in the Future (contd)
  • Rising health care costs probably represent a
    greater threat to retirement security than
    pensions and savings shortfalls.
  • The EBRI now projects that future retirees will
    need 200,000 in savings/investments to cover
    out-of-pocket health care costs.

7
Costs Now and in the Future (contd)
  • But, future retirees are likely to need less
    health care due to improving health status and
    lower functional impairment levelsabout a 20
    drop since 1984.
  • This is a major quality of life and health care
    cost benefit.

8
Costs Now and in the Future (contd)
  • Health care costs, however, will outstrip the
    reduced need for care and create substantial
    challenges for both government and
    individuals/families
  • Medicare is facing a 25/30 trillion shortfall
    over the next 50/75 yearsmore with Part D
  • Medicaid (LTC) is the fastest growing part of
    many state budgets (10/20 annually)
  • Health insurance costs for employers and
    employees are increasing 2/3 times the CPI
  • Retirees (Medicare) have high out-of-pocket costs
    and they will increase substantially in the future

9
C/E of Health Care Innovations (contd)
  • Increasing efficiency would help improve quality
    of care, but not much to contain costs (half get
    the care they should)
  • Better, more extensive patient information
    systems
  • Better technology review
  • More medical effectiveness outcomes research and
    research-based reimbursement procedures (pay for
    quality)
  • More HCB LTC, less dependence on costly nursing
    home care and more LTC insurance
  • Reduced disparities in access to quality care
  • These increased efficiencies will both reduce
    (HCBLTC, fewer ineffective procedures) and
    increase (reduced disparities, increased access)
    costs

10
Health Care Reform Access, Quality, Costs
  • Managed care organizations failed to contain
    costs permanently and raised concerns about
    access and quality, but they are still doing very
    wellmost people in HMOs/PPOs and Medicare
    Advantageis increasing (19)
  • Competitive markets rarely function well in
    health care (information and infrastructure
    problems)
  • Employers are increasingly unable to bear rising
    health care costsmore costs borne by employees
  • HSAs are unlikely to contain costs and are likely
    to disadvantage the sickest and least
    affluentthe 10/70 issuebut may improve
    availability of comparative cost and outcome
    information

11
Health Care Reform (contd)
  • How will retirees be able to absorb 35/40
    out-of-pocket costs?
  • How will we cover uninsured/underinsuredthe
    Massachusetts program, California plan, Bush tax
    incentives?
  • How and to what extent do we want to constrain
    technological innovations?
  • Other developed countries pay far less for health
    care (our prices are much higher) and get better
    outcomes.
  • So, what are our options? HSAs, state reform
    initiatives and 2008 presidential campaign
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