Old age, Health, Long-term care Alberto Holly Institute of Health Economics and Management (IEMS)

1. Old age, Health, Long-term care Alberto Holly Institute of Health Economics and Management (IEMS) University of Lausanne Prepared for presentation at the Workshop “Well-being of the Elderly” ESF FORWARD LOOKS project “Ageing, Health and Pensions in Europe” IEMS, University of Lausanne, Friday October 24, 2008

2. Outline • Introduction • Background: Demographic and epidemiologic changes • Policy questions (some) • Health-related economic issues • Health care: Ageing and the past evolution of health care expenditure • Long-term health care: • Informal care • Projection of long-term care expenditure Old age, health, long term care

3. Introduction • The declines in fertility reinforced by increasing longevity (in good health) have produced and will continue to produce unprecedented changes in the structure of all societies. • Population ageing is having major consequences and implications for a large number of facets of human life. Old age, health, long term care

4. Introduction • Not only in the economic area (including intergenerational transfers), but also in the social area: • Health and health care; • Family composition and living arrangements; • Housing and migration Old age, health, long term care

5. Introduction • This paper will concentrate on: • Health-related economic issues • Ageing, health care and long-term care • To this end a solid demographic and epidemiologic foundation is needed. Old age, health, long term care

6. BACKGROUND: DEMOGRAPHIC AND EPIDEMIOLOGIC CHANGES Old age, health, long term care

7. Demographic and epidemiologic changes • Demographic transition: refers to a change in birth and death rates • Presently: stable low growth rate where both births and deaths rates are low • “Ageing”: Two concepts often confused: • Ageing of the population: Process by which older individuals become a proportionally larger share of the total population Old age, health, long term care

8. Demographic and epidemiologic changes • Longevity: Measured by life expectancy at a specific age (at birth, at 65, and at 80) • Mortality decline, especially at older ages, assumes an increasingly important role in population ageing • More people will survive to older ages • In proportional terms, gains in life expectancy are expected to be higher at older ages Old age, health, long term care

9. Demographic and epidemiologic changes • The fastest growing age group in the world is the oldest-old, those aged 80 years or older. • The majority of elder persons are women as female life expectancy is higher than that for men. • “Parent support ratio”: ratio of the population 85 or older to those aged 50 to 64. • 2% in 1950; 4% in 2000; projected to reach 11% by 2050. • More and more people in their fifties and sixties are likely to have surviving parents or other very old relatives Old age, health, long term care

10. Demographic and epidemiologic changes Improvements in longevity over time Old age, health, long term care

11. Demographic and epidemiologic changes • Evidence concerning recent trends in mobility is quite consistent and generally favours the theory of compression • People live longer and in better health on average • Disability-adjusted life expectancy (DALE) improving Old age, health, long term care

12. Policy questions • We mention only a few questions at this stage of special relevance in terms of public policy, in relation to the topics addressed in this paper – in particular long-term care and informal care: • The rapid growth of the oldest groups among the older population and its consequences; • The increasing female share of the older population and its consequences. Old age, health, long term care

13. Health-related issues in the economics of aging Old age, health, long term care

14. Health-related economic issues • Topics in the“Health Economics of Ageing” • Health and Wealth • understand the explanation for the very strong relationship between health and wealth, and in particular the direction of causality Old age, health, long term care

15. Health-related economic issues • Housing • To understand the change in the home equity of the household as they age, in particular the relationship between changes in home equity and changes in health status and in household structure. Old age, health, long term care

16. Health-related economic issues • Living arrangements • Study in the context of European countries • Transitions to an institution or to the home of children; • In particular in connection with the formal and informal care issues. Old age, health, long term care

17. Health-related economic issues • Financial status • Does the death of a husband very often induces the poverty of a surviving widow in European countries similarly to the US? Old age, health, long term care

18. Ageing and health care expenditure Old age, health, long term care

19. Ageing and health care expenditure • Statistical data show, that for any given year given (for example 2007), the health expenditure increases with age, except for the very old age population. • In particular, the total health expenditure is much higher than the average for the elderly of more than 65 years. • Since the population aged 65 years and more will strongly increase until 2050 (see for example United Nation, 2001) it is often claimed that the demographic changes will result in an acceleration of the health expenditure. Old age, health, long term care

20. Age Old Young Old age, health, long term care

21. Shifts in expenditure profile : pure ageing effect Old age, health, long term care

22. Ageing and health care expenditure • But the reasoning at the base of this assertion seems to confuse the notion of correlation with that of causality. Its validity deserves to be examined more closely. • One alternative theory: End-of-life costs • But this theory itself is not entirely convincing: Old age, health, long term care

23. Ageing and health care expenditure • Stability during a long period the ratio of health care expenditure between survivors and decedents among people of the same age remained constant during a more than fifteen years period. • This tends to show that the health care expenditure for these two categories results from the effect of common factors Old age, health, long term care

24. Comparison of the cost profiles with and without deceased of the in-patient tariff Deceased costs Survivors costs Groupe d’âge Old age, health, long term care

25. Shifts in expenditure profile : non-ageing drivers Old age, health, long term care

26. Ageing and health care expenditure • One of the main factors is usually identified to be the evolution of medical technologies. • The last years of life express a health status; • The end-of-life costs of the last years reflect the costs of health care to which patients survive whereas others unfortunately die. Old age, health, long term care

27. Ageing and health care expenditure • Thus, age is not a main driver of health care expenditure, neither end-of-life treatments. • They should be replaced by the medical technological advancement and its diffusion in the explanation of the evolution of health care expenditure. Old age, health, long term care

28. Ageing and long-term care: • Informal care • Projection of • long-term care expenditure Old age, health, long term care

29. Ageing and long-term care • Long-term care is care for chronic illness or disability instead of treatment of an acute illness • INFORMAL CARE • The most important source of long-term care in all OECD countries • It’s level is a response to a number of factors • Living arrangements of elderly people, • Longevity of elderly husbands and wives, • Trends in the labour market participation of those groups in the labour force that are informal carers Old age, health, long term care

30. Ageing and long-term care • The bulk of informal care is provided by women aged over 45. • Older persons with care needs who live together with their family or partner are more likely to receive informal help than those living alone. • The growth in the number of older people living alone will itself increase the demand for formal care services in the future. • Living alone has become a much more frequent experience for elderly people in the OECD area. Old age, health, long term care

31. Ageing and long-term care • Depending on • The institutional setting • The health status of individuals • Informal care may be a substitute or a complement to other forms of formal long-term services (home care and institutions like nursing home) • A strong bequest motive may also influence the demand and supply of informal care. Old age, health, long term care

32. Ageing and long-term care • Informal care has a positive impact on • Health outcome • The use of different types of health care services, and hence on health care expenses • Few economic studies written that focus on issues specific to non-US countries, or use non-US data. • The situation has changed only recently, in particular with the availability of SHARE data. Old age, health, long term care

33. Ageing and long-term care • Projection of long-term care expenditure • Demographic only models have serious limitations. • Demographic projections of ageing populations crucially depend on • The reliability of forecasts of future trends in life expectancy in particular of the remaining life expectancy at higher ages • The average health (chronic diseases) and disability status at each age, • The per capita medical spending conditional on health (chronic diseases) and disability status, which also varies according to age Old age, health, long term care

34. Ageing and long-term care • Importance of the three scenarios regarding morbidity: compression, extension, dynamic equilibrium. • Long-term care is does not include treatment of an acute illness: • age (as an indicator of chronic diseases and disability status) may be a driving factor of long-term care expenditures. Old age, health, long term care

35. CONCLUSIONS Old age, health, long term care

36. Conclusions • Need for more advanced research about health-related economic issues from an interdisciplinary perspective. • Informal care and its development is a fundamental topic which requires more research work. It is important on the health and policy agenda. • Fits to the policy questions suggested above. Old age, health, long term care

37. Conclusions • Projections of health care and long-term care are also important research topics from both the academic and policy perspectives. • Requires convincing integration of some aspects highlighted in this paper and which have been neglected so far in most of the published literature on these projections. Old age, health, long term care

38. Conclusions • Requires the development of new research infrastructures, • notably the development of appropriate longitudinal data bases, complementary to SHARE, • allowing for cross-country comparisons at least among European countries. Old age, health, long term care