The Aging Boom: Demographic Trends and Policy Implications H Committee on Healthy Seniors January 22

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The Aging Boom Demographic Trends and Policy
Implications(H) Committee on Healthy Seniors
January 22, 2008
E. Douglas Beach, Ph.D.Secretary
Charlie Crist Governor
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The Aging Boom Demographic Trends

• Number of aged will continue to grow at a fast
  rate.
• Disability rates increase with age.
• Fewer younger adults relative to elder
  population.
• Longevity keeps increasing.
• Floridas demographics lead the nation.

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Population By Age
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Population Growth by Age
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Share of Elder PopulationFlorida
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Longevity Growth
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Disability rates increase with age
Source Manton, Gu and Lamb, 2006
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Elder Dependency Ratio Number of working age
adults per elder projected to decrease
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Elders account for a large share of entitlement
spending
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Elders account for a large share of entitlement
spending
Source Population Aging and Entitlement Growth,
AARP, 2007
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The Dire Case on Social Burdens

• The increased number of elderly will put
  unsustainable fiscal strains on the nation and
  the state due to
• A smaller share of population contributing fiscal
  resources
• A fast growing and increasingly disabled elder
  population using more Medicaid and other social
  services

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What we know Unsustainable trends can not be
sustained

• over the long run

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The Aging Boom A New Look at the Facts

• Favorable trends
• Declining disability
• Compressed morbidity
• Increased labor force participation
• Increases in education and productivity
• Most age related entitlements are federal
• Increased affluence among old

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Long term forecasts are highly uncertain
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Demand Trends Less Disability

• Since 1984 disability rates have been declining
  at 1.5 percent per year for the 1984-1994
  period-- and 2 percent since.
• This trend is expected to continue. Between 2000
  and 2050 the rate of severe disability among the
  elderly is projected to be cut by half.
• Older Floridians are 45 percent less likely to
  require long-term nursing home care than elders
  from other states.

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Demand Trends Less Disability
Number of Americans 65 and Older with Any Chronic
Disability
(1982-2006)
Source AARP Public Policy Institute based on
1994 National Long Term Care Survey and U.S.
Census Bureau population projection middle
series.
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Disability Rates Are Declining
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Compressed Morbidity

• Incidence of chronic disease increases with age,
  however
• Improvements in disease management have reduced
  the disabling effects of morbidity.
• Therefore, even as there are increases in chronic
  disease there are reductions in disability at
  advanced ages
• Leading to longer independent life-spans.

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Compressed Morbidity Longer life and fewer
disabled years
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Economic dependency ratio will remain favorable

• While the elder dependency ratio will increase,
  the total dependency ratio will remain
  favorablebelow its 1970 value.
• Labor force participation among elders is
  increasing and likely to sustain the trend over
  the long run.

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Dependency Ratios Elder Total
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Total Dependency Ratio Florida
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Increasing Elder Labor Force Participation--Causes

• Future older women more likely to participate in
  labor forcecohort effect.
• Labor force participation for women 55 and older
  has increased by over 50 percent since 1975.
• Higher levels of education raise opportunity cost
  of leisure retirement.
• Workers with a graduate degree are twice as
  likely to continue working after age 65 than H.S
  grads.
• H.S. grads. Are 50 percent more likely to
  continue work after age 65 than those w/o H.S.
  diploma.

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Increasing Elder Labor Force ParticipationCauses
(cont.)

• Opportunity cost of employer provided health care
  insurance.
• Fewer employees in defined benefit plans that
  force retirement.
• Higher vitality levels due to reductions in
  disability and severity of morbidity.
• AND..

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Increasing Elder Labor Force ParticipationCauses
(cont.)

• Shortages of younger workers lead employers to
  bid higher wages and desirable working conditions
  to experienced workers.

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Labor Force Participation Trends
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Entitlement Spending by Age

• Entitlements for elders are mostly federal
  outlays.

Source Population Aging and Entitlement Growth,
AARP, 2007
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Is Aging the Impetus for Medical Expense Growth?

• While medical expenditures increase with age, the
  growth of the aging population accounts for only
  a small share of cost growth (one-sixth).
• Increases in life span, increase expenses
  marginally except for Long Term Care
• Technology, Rx and system administration account
  for most of the growth in costs since 1970 (CBO)

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Growth of MedicareThe Role of Aging
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Growth of MedicaidThe Role of Aging
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Medical Expenditures and Age
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Containing The Cost of Long Term Care (LTC)

• The cost of LTC is driven by nursing home care,
  even as nursing home utilization has declined.
• To reduce the cost of LTC it is essential to
  divert persons from institutionalization
• Through decreases in disability
• Supporting alternatives such as home care and
  assisted living

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Long Term Care in FloridaPositive Trends

• Declining disability rates
• Older Floridians 45 less likely to use nursing
  home care.
• Healthy Assisted Living Industryurban areas
• Healthy Home Care Industryurban areas
• More elders to provide care for loved ones
• Low rate of Medicaid use among FL elders.

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Summary of LTC Demand Factors--Florida
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Nursing Home Use Growth Florida
12.00
10.18
10.00
8.00
7.58
6.00
4.00
3.00
3.34
2.15
2.12
1.63
2.00
1.44
1.04
0.25
0.07
1.32
0.54
0.00
2004
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2005
-0.55
-0.75
-2.00
-2.02
-4.00
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Shift to ALF Care
90,000
80,000
Nursing Home Beds
70,000
60,000
50,000
40,000
ALF Beds
30,000
20,000
10,000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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Negative TrendNursing Home Per Diem Growth
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Costs Nursing Home Budgets Growth
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Floridas Long-Term Care Costs Are Lower Than
Other States
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Elders As Economic Engine

• In 2000, mature Floridians paid 1.4 billion more
  in state taxes than they received in social
  services.
• In 2006 the aggregate cash income of Mature
  Floridians reached 228.5 billion
• In the year 2000, Floridians 50 spent a total of
  135.4 billion, almost 12.5 billion more than
  their younger counterparts
• Financial industry estimates put the value of
  assets in deposit by Floridians age 50 and older
  at 320 billion.

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Elders As Economic Engine (Cont.)

• In the year 2000, mature residents of the state
  contributed over 3.5 billion to charities. They
  also contributed heavily with their time and
  talent, as they donated 7.5 million person days.
• In 2000, mature Floridians paid 9 billion in
  out-of-pocket expenses for medical care and the
  federal government, through Medicare, paid on
  their behalf an additional 18.4 billion. This
  represented 27.4 billion in expenditures
• In Florida as much as 50 of all residential
  construction is tied to the mature market.
  Residential construction is a 41 billion per
  year industry. Therefore the mature market
  accounts for over 20 billion in residential
  construction and 100,000 good paying construction
  jobs.

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Key Issues for sustaining the aging boom

• Policies that favor workforce participation rates
  among older citizens
• Enhancing the attractiveness of Florida in terms
  of quality of life for persons of all ages.
• Maintaining the integrity of income support
  systemsSocial Security, private pensions and
  defined contribution plans

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Key Issues for Sustaining the Aging Boom (cont.)

• Controlling cost of medical and long term care
  by
• Supporting health promotion and wellness
• Social
• Intellectual
• Physical
• Supporting and encouraging family and personal
  responsibility

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Key Issues for Sustaining the Aging Boom (cont.)

• Support a public long term care system that
• Favors community based care
• Promotes deinstitutionalization
• Removes any institutional bias
• Is customer centric
• Has flexibility
• Funding follows the consumer across care settings
• Service dollars can be used to supplement rather
  than substitute for personal/family resources
• Services can be used on a preventive basis

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Key Issues for Sustaining the Aging BoomSumming
Up

• To strengthen its economic competitive position,
  Florida has to embrace the Aging Boom as an
  ongoing high priority economic development
  strategy.