Living to 100 and beyond: Implications of longer life spans

North American Actuarial Journal, Jul 2002 by Rappaport, Anna M, Parikh, Alan

The impact of increasing longevity on the cost of providing long-term care insurance is difficult to predict. If the extra years bring additional years of infirmity, then this insurance will become more expensive. If the extra years merely result in a postponement of the period of covered infirmity, then the longer discount period may actually bring costs down. The large degree of uncertainty about this issue contributes to the current cost of this insurance, as insurers are forced to build appropriate margins into their pricing to account for the risk.

Financial Planning

Increasing longevity is one of the many factors contributing to the expected growth of the financial planning industry over the coming decades. Greater awareness of the increasing risks of longevity could drive more of the elderly and near-- elderly to seek advice from a variety of financial planners (Mathew Greenwald & Associates and Employee Benefit Research Institute 2001). Technology has made new types of financial planning services available.

Direct Caregiving Opportunities

A wide array of businesses will provide direct caregiving services to the elderly:

* Health care institutions, including hospitals, which are expected to experience increasing demand as the elderly population grows

* Organizations that provide home-based medical care and other types of assistance, allowing the individual to remain in their own residence, and

* A variety of assisted living facilities, ranging from adult day care to residential care to nursing homes.

Here again, increasing longevity merely compounds other demographic trends in magnifying the prospects for growth of these industries. Patterns of care are evolving as are the needs of the population and methods of financing. We cannot predict the specific future without understanding the future health status of the very old as well as the financing of care. Even under the assumption of declining rates of disability, however, the Congressional Budget Office (1999) projects that overall inflation-adjusted expenditures for longterm care will grow by almost 70% over the next 20 years.

Of greater concern, the health care industry could find itself ill-prepared to handle significant increases in the number of the very elderly. Hospitals across the United States are already experiencing difficulty recruiting adequate numbers of trained nurses and health care professionals, while at the same time the average age of active nurses continues to rise (Buerhaus et al. 2000). Clearly, the medical professions have much to do before their memberships are adequate in numbers and training to handle the expected needs of the elderly.

Housing

Many of the elderly choose to live in retirement communities or housing. Often some care plus other services are combined with housing. There has been a great deal of growth in retirement housing, particularly in states that are popular retirement destinations. For the affluent, there are many choices in retirement housing. For the poor, there are fewer choices, and many end up living with families when that option is available. This will be an area of significant growth in the future.