The 2030 problem: caring for aging Baby Boomers - Statistical Data Included

Health Services Research, August, 2002 by James R. Knickman, Emily K. Snell

A major public policy concern in the long-term care field is the potential burden an aging society will place on the care-giving system and public finances. The "2030 problem" involves the challenge of assuring that sufficient resources and an effective service system are available in thirty years, when the elderly population is twice it is today. Much of this growth will be prompted by the aging of the Baby Boomers, who in 2030 will be aged 66 to 84--the "young old"--and will number 61 million people. In addition to the Baby Boomers, those born prior to 1946--the "oldest old"--will number 9 million people in 2030.

This paper assesses the economic dimensions of the 2030 problem. The first half of the paper reviews the literature and logic that suggest that aging in general, and long-term care services in particular, will represent an overwhelming economic burden on society by 2030. Then, a new analysis of burden is presented to suggest that aggregate resources should not be a major issue for the midcentury economy. Finally, the paper presents four key challenges that represent the real economic burden of long-term care in the twenty-first century. These challenges are significant but different from macro cost issues.

What type of economic burden might be considered overwhelming? Existing literature never explicitly defines this but the sense is that the burden might be considered overwhelming if: (a) tax rates need to be raised dramatically, (b) economic growth is retarded due to high service costs that preclude other social investments, or (c) the general well-being of future generations of workers is worse than that of current workers due to service costs and income transfers.

The discussion has significant implications for public policy and for private actors focused on developing an effective care system for the mid-twenty-first century. Public policy goals related to an aging society must balance the need to provide adequate services and transfers with an interest in maintaining the economic and social well-being of the nonelderly]. The economic challenges discussed are such that public and private progress that begins in the near future will make the future burden substantially easier to handle.

DEFINITIONS AND BACKGROUND

Various aspects of economic burden are associated with an aging population: social security payments will increase, medical care insurance costs will grow, the burden associated with uncovered medical expenses such as pharmaceuticals will become quite serious, and long-term care costs will grow. Much of the logic of the paper applies to each of these financial resource challenges. However, we focus principally on the implications of long-term care services, which along with prescription drugs, have had the fastest growing costs in the list cited.

Every elder has to prepare for four key "aging shocks": uncovered costs of prescription drugs, the costs of medical care that are not paid by Medicare or private insurance, the actual costs of private insurance that partially fills in the gaps left by Medicare, and the uncovered costs of long-term care.

If the lifetime costs of each of these "aging shocks" are calculated, the long-term care burden is the worst by far. The typical 65-year-old faces present value lifetime costs for uncovered long-term care of $44,000. By contrast, the present value of lifetime out-of-pocket prescription drugs costs averages $12,000, uncovered medical care comes to $16,000, and uncovered private insurance premiums come to $18,000 (1) (Table 1). It should be noted that because of the United States' approach to financing these services, aging shocks represent burdens borne by individuals more than society. In most other countries, these items tend to be financed socially.

Long-term care includes a broad continuum of services that address the needs of people who are frail or disabled and require help with the basic activities of everyday living. The services can vary from informal care delivered by family and friends to the formal services of home care, assisted living, or nursing homes (see Table 2).

Long-term care professionals generally distinguish two types of supportive care needs for the frail: assistance with instrumental activities of daily living (IADLs), such as shopping or cleaning, and assistance with physical activities of daily living (ADLs), such as eating, bathing, or moving around. (2) Among the 31 million noninstitutionalized elderly, 1.8 million have IADLs and 3.3 million have ADLs (Table 3). Of the 3.3 million, 1.5 million need help with three or more ADLs, indicating a very high level of need that requires extensive home care or institutional care. Another 1.4 million elderly are cared for in nursing homes and most of these elderly have 3 or more ADLs (Georgetown University Institute for Health Care Research and Policy 1994-5).

These statistics measure the number of elderly who are disabled at any given point in time. Most elderly who live beyond 75 or 85 years of age become frail at some point and need some form of assistance, making lifetime risks much higher. In fact, 42 percent of people who live to the age of seventy will spend time in a nursing home before they die (Murtaugh et al. 1997).