ED 251 375

TITLE

INSTITUTION

SPONS AGENCY

REPORT NOPUB DATENOTEPUB TYPE

EDRS PRICEDESCRIPTORS

IDENTIFIERS

DOCUMENT RESUME

SO 016 065

Tomorrow's Elderly. A Report Prepared for theChairman of the Select Committee on Aging. Hone ofRepresentati- Ninety-Eighth Congress, SecondSession (Oct% r 1984).Congressional .Jearinghouse on the Future,Washington, DC.Congress of the J.S., Washington, D.C. House SelectCommittee on Aging.Pub-98-457Sep 8471p.Legal/Legislative/Regulatory Materials (090)

MF01/PC03 Plus Postage.Age Discrimination; Aging (Individuals); Employment;Financial Support; *Futures (of Society); *GovernmentRole; Health Needs; Health Services; Legislation;*Older Adults; Policy Formation; Population Trends;*Publ . Policy; Retirement; Sociocultural Patterns;Trend AnalysisCongress 98th

ABSTRACTMajor long-term public policy issues related to the

aging of the U.S. population are examined. Chapter one provides anoverview of trends pertaining to the future elderly population,emphasizing some of the issues Congress may need to address in thenear future. Sources of support for the elderly are also examined.Employment and retirement issues are the foci of the second chapter.The key policy issue discussed is how to provide cost-effectiveincentives to an increasing proportion of healthy elderly who canwork in a productive economy free of age discrimination and withoutpenalizing those who must retire early. Chapter three discusses theallocation of health care resources. It points out that Congress willhave to struggle to balance issues such as government regulation,quality, freedom of choice, effectiveness, efficiency, ane equityacross society as it makes policy in this area. The concludingchapter deals with long-term care, defined as helping people livetheir lives rather than as extended medical care. Also provided arebrief highlights of legislation affecting the elderly and abibliography. (RN)

******************************************t***************************** Reproductions supplied by EDRS are the best that can be made *

* from the original document. *

***********************************************************************

[C0111/11WICE PRINT]

38-1161 0

TOMORROW'S ELDERLY

A REPORTPRTARED ST THE

CeNGRESSIOSAL CLEARINGHOUSE

ON TgE FUTURE

FOR THE CHAIRMAN

07 THE

SELECT COMMITTEE ON AGING

HOUSE OF REPRESENTATIVESNINETY-E1GHTH CONGRESS

SECOND SESSION

OCTOBER 1981

Comm. Pub. No. 98-457

Printed for the nse of the Select Committee on Aging71MMIN,

C.S. GOVERNMENT PRINTING OFFICEWASHINGTON I484

US. OfIENUCATIO01NATIQNAL litSTITUTE OF EDUCATION

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SELECT COMMITTEE ON AGINGEDWARD R. ROYEAI, California, Chairman

CLAUDE PEPPER. FloridaMARIO BIAGGI. New YorkIKE ANDREWS. North CarolinaDON HONKER, WashingtonTHOMAS J. DOWNEY, New YorkJAMES J. FLORID. New JerseyIIAROLD K FORD. TennesseeWILLIAM J. HUGHES, New JerseyMARILYN LIA)YD, TennesseeSTAN LUNI)INE, New YorkMARY ROSE DAKAR. OhioTHOMAS A. LUKEN. OhioI;NRALDINE A. FERRARO. New YorkBEVERLY B. BYRON. MarylandWILLIAM It. RATCHFORD. ConneetigDAN MP.74, FloridaHENRY A. WAXMAN, CaliforniaMIKE SYNAR. OklahomaBUTLER DERRIC'... South CarolinaBRUCE F. V ENTO, MinnesotaBARNEY FRANK. MassachusettsTOM LAN"l'OS. CaliforniaHON WY DEN. OregonIlONALD JOSEPH ALBOSTA. MichiganGT9. W. olocturrr, J. Maggot,

ILLIAX HILL BONER, TennesseeIKE SKELTON, MissouriDKNNIS M. Timm. MichiganROBP,RT A. HORSE), PennsylvaniaFRE:ERICK C. (RICK) BOUCHER, VirginiaBEN ERDREICH. AlabamaBI'DDY XseKAY, FloridaHARRY M. REID, NevadaNORMAN HISISK Y. VirginiaTOM V ANTtERGRIFF. TexasROBERT E. WISE. Js.. West VirginiaBILL RICHARDSON, New Mexico

Jonas J. LAIlinalnen. Staff DirectorPAUL FterliZOKL, Miner-UV Staff Director

MATTHEW J. RI N AUX), New JerseyRanking Minority Mettler

JOHN PAUL HAMMERSCILMIDT, ArkansasRALPII KEG MA. OhioNORMAN D. SHUMWAY, CaliforniaOLYMPIA J. SNOWK MaineJAMES M. JEFFOROM. Vermont'I 9MAS J. TAUKK, IowaJUDD GREGG, New HampshireGEORGE C. WORTLEY, New YorkHAL DAUB. NebraskaLARRY E. CRAIG. IdahoCOOPER EVANS. IowaJIM (N)URTER. New JerseyLYLE WILLIAMS. OhioCLAI'DINE SCHNEIDER, Rhode IslandTHOMAS J. RIDGE, PennsylvaniaJOHN MeCAIN. ArizonaMICHAEL HILIRAKIS. FloridaGEORGE W. GEKAS. PennsylvaniaMARK D. SILJANDER. MichiganCHRTSTOPER II. SMITH. New JerseyMICHAEL DEWY NE, Ohio

(n)

PREFACE

As Chairman of the Select Committee on Aging it is my firm beliefthat by looking at tomorrow's problems and opportunities today, futureproblems can be averted and future opportunities can be seized. Thisbooklet is the product of the Congressional Clearinghouse on the Future.Even though the Committee does not ordinarily publish documents that arenot prepared by the Committee, this booklet gives us both an historicalperspective and vision for the future, and 1 believe an exception iswarranted in this case.

This booklet identifies major, long-term, public policy issues relatedto the aging of the U.S. population. it scans key long-range trendspertaining to the future elderly population emphasizing so/me of the issuesCongress may need to address in the near future.

This booklet is arganized around the presentation of trends andissues. In general, the data are summarized in a short headline orparagraph, supporting trend data are shown in graphic form, major issuesarising from the data are discussed, unresolved questions are raised, andillustrative policy options are presented. The policy options are given to

g stimulate thought, discussion, and exploration; they are not comprehensive,nor are they endorsed by the Congressional Clearinghouse on the Future,the House Select Committee on Aging or any other group or individual whohelped in preparing this document.

The data and projections presented here are primarily from theestablished Federal statistical agencies such as the Bureau of the Census,the Bureau of Labor Statistics, the Health Care Financing Administrationand the National Center for Health Statistics. No original data collectionor data analysis was performed for this project.

Commendations are due to all involved in the preparation of thisdocument. I believe that this booklet provides a substantive framework inwhich to consider these various public issues. I am hopeful that thedissemination of this booklet will contribute to a better conceptualization01 the needs of our aging United States population and better public policyin behalf of the elderly.

Edward R. RoybalChairman

111

r

4..

Tomorrow'sElderly

IssuesforCongress

Prepared forThe House select Committee on AgingbyThe Congressional Clearinghouse on the FutureSeptember 1984

CONGRESSIONAL CLEARINGHOUSE ON THE. FUTURE

Bon EDGAR (PA)('hair

MAX Myers (MT)HERILLEr IlEpELE ( IA)THIMAH J. DOW sex (NY)NEWT GINcHRli (( ;A).wwirr (IoRE. Jr. (TN)WILLIAM LEHMAN (FL)

ANTHONY REILENSON (CA)LINDY JUMP.: (LA))k.N BoNNETI (WA)WILLIAM F. CLINGER. Jr. (PA)Wit.t.)Asi S. ConEN ( ME)Jim rooms (TN)ALAN CKANSTON (CA)Cif RisTOpHER Doti) (CT)DNvE Ii. rAst.ELL FI,)TII1MAR S. FoLEy (WA)Wr( HE FOWLER, Jr. (GA)

It RMAN ( KS )DENNts M. HERTEL (MI)

IluoniewER (TX)

JOHN HEINZ (PA)Vice Chair

RxEcrTIVE. COM RLITTEE

Crams W. Loma (LA)BARRARA A. M1E11141E1 (MI))CHARLIE Rut : (NC)CLArDINE SliNEIER (RI)Timmity WIRTR (CO)

ADTimnay CuSIVITTLT

ANDY Ika:LAND (FL)JOHN J. LAFALAT (NY)STAN LENDINE ( NY)STEWART B. MeKt.mmEir (CT)Bunn e MACKAY (FL)IIHRERT T. MATNII (CA)STEPHEN L. NEAT. (NC)CLAIIDANE PELL (RI)JAMES II. SIIEVER (NY)IIARLEY 0. STAIWERR, Jr. (WI")MolOtiE4 K. UDALL (AZ)

F. VEvnt (MN)IlL:Nity A. WAXMAN (('A)

FOREWORD

Congress faces some of the most emotional issues of our time as itlooks at the needs of the elderly and the government's role in meeting thoseneeds. The American population is aging. Regardless of birth andimmigration rates, there are going to be more elderly people in our countryin the future.

This is very good news, because it means people are living longer onthe average. However, the aging of our society also poses extremelydifficult questions: Do we need to rethink our definition of "old age" andour attitudes about the elderly? What can and will elderly individuals andtheir families do alone or with the help of the private sector to support andcare for the elderly? What must government do? And from the young:Who will support us when we're old?

In answering these questions, Congress will have to address how tomaintain commitments to the elderly, assure fairness across generations,cope with escalating health care costs, protect against an uncertaineconomic future, and restore and maintain a balanced federal budget.

The underlying philosophy of this discussion is that the elderly havethe same desires as the rest of the population:

o A respected place in the community with no discriminationbecause of age, sex, race, or religion;

o Healthful living and working coneitiors and good quality healthcare when needed;Opportunity to work for a fair wage during their healthylifetime, with employment suitable to their mental andphysical abilities; and

o Economic support when retired or unable to work because of illhealth or disability.

We are examining long-term trends and issues so that Congress canact to influence the future rather than wait and be overwhelmed bydemographic realities. If we act now rather than later, then we allemployer and employee, parent and child, government and citizen willparticipate in a better future.

Bob EdgarPennsylvaniaC hal man, Congressional

Clearinghouse on the Future

ACKNOWLEDGEMENTS

The Congressional Clearinghouse on the Future wishes to acknowledgethe important contributions made by a number of people in the preparationof this policy primer. First and foremost, the Clearinghouse thanks ElaineBunten-Mines, a Commerce Science and Technology Fellow, whocoordinated the study and wrote and edited the report. Without hercommitment, "Tomorrow's Elderly" would not have been possible.

The Select Committee on Aging of the U.S. House of Representativesinitiated this study by asking the question, "What trends will be importantto our committee and the Congress in coming years?" The Committee'sstaff director, Jorge J. Lambrinos, and Geo. Allen Johnston, GaryChristopherson, and Lowell Arye provided valuable comments and expert,technical advice on substantive issues. Special mention also is in order toElizabeth Bagnato who typed and prepared this document for printing.

A team of experts and consultants at the U.S. General AccountingOffice conducted the research and developed the charts used in thereport. Special thanks go to Ken Hunter who provided important supportand guidance; to Hal Wallach and Audrey Clayton who managed the team;and to their outside consultants Sara Rix, Haeworth Robertson, Beth So ldo,and John Deshaies; and to the able research assistance of Emily Agree,Pauline Mahon-Stetson and Cheryl Malanicks

Several other Congressional staff members reviewed the drafts andprovided invaluable technical and editorial assistance. The staff directorof the Senate Special Committee on Aging, &O-.n Rother, and a member ofhis staff, Betsy Vierek, were especially helpful and cooperative. Specialthanks also go to Retina Sehiebler, a staff member of U.S. RepresentativeBuddy MacKay and to the staff of U.S. Representative Bob Edgar whoreviewed the policy primer: Dean Kaplan, Richard Fuller, Skip Powers, andJohn Briscoe.

From the Clearinghouse, Lena Lupica the Director, and Elaine Wickerdeserve special mention for their vision and support of the effort and theirreview of many drafts of the report.

TABLE OF CONTENTS

Prefvee III

Foreword VII

Acknowledgements IX

Table of Contents XI

Executive Summary XIII

Overview of Trends 1

Employment and Retirement 11

Allocation of Health Care Resources 25

Long-Term care 39

Epilogue 49

Appendix 1: Legislative History 51

Bibliography 55

w,s

EXECUTIVE SUMMARY

The aging of the Americanpopulation is no longer news. Theincreasing numbers of elderly people inour society, and particularly, theincreasing numbers of very old citizensrequire the Congress to examine severalpublic policy areas and, in all likelihood,to act on its findings.

Some of the most important trendsare summarized in the accompanyingcharts. These demonstrate that:

o The elderly are expected tomake up an increasing proportion of theU.S. population through the middle of thenext century. By that time, one personin five is expected to be 65 or older.

o Higher proportions of theelderly population will be female andover age 85.

o Because women marry youngerthan men and outlive men, on theaverage, most elderly women are widowsand most elderly men are married andlive with their wives. Elderly womenliving alone tend to be poorer and atgreater risk of institutionalization thanthe general population of elderly.

o While the elderly as a grouphave about the same rates of poverty as

the general population, blacks, women,and the very old, and those living alonehave higher then average poverty rates.Members of more than one subgroup(e.g., elderly black women living alone)tend to have extremely high povertyrates.

o Social Security benefits are andwill continue to be the largest singlesource of income for most elderlycitizens, even though income frompensions and assets may become moreimportant in the future to higher incomegrown than it is today.

o Over the past 20 years, costsfor programs that benefit the elderlyhave grown rapidly. These programs willface the same pressures for eastcontainment as other programs in thefederal budget. There will be increasingscrutiny of elderly programs, because the"senior boom" when the "baby boom"reaches retirement age early in the nextcentury will place enormous pressureson programs that benefit the elderly.

This public policy primer looks atthree issues that are most likely to needCongressional action in the next decadeif we are to prepare for the senior boomin the 21st century.

10

PROJECTED DEMOGRAPHIC TRENDS PUN THE ELDERLY 111110-2050

ST

Ifirt ge.40

17

I eig

IMMO

popinsnore 1111 AND OVER

TOTAL

deMAU

sus 71000 VON

$

tt

POPULATIONGRILI

Ile AND OVERJONSI

ANIIIMMONMENMI

TOTAL

.69 FEMALE

3. . 4-MP 1460 Oft inn

POPIRATION Se AND OVER ASPERCENTAGE OF TOTAL POPULATION

.4.M.1111MMI..1.

.17-Fidm wear.43is

VEAL: LWE REMAINING AT OS

A. 4

Noe N/40 arnAomepa, AND OVER

OF ELDERLYDON

HISTORIC AND PROJECTED TRENDS IN SOCIAL AND ECONOMICCHARACTERISTICS OF THE ELDERLY ISSINERIS

'-.,Ltstss

FEMALES.a1 N6e woo

LAINTR PONCE PARTICIPATIONOP GI AND OVER

Ndlowlommlimmideivemdmwoommondlmtr

MAC

r.' tit

IMO MIR MC

PERCENTA41111111 AND OVERDELO. THE relnu:TY LEVEL

XV

HISTORIC AND PROJECTED TRIMS IN SOCIAL AND ECONOMICCHARACTERISTICS OF THE ELDERLY 111141-2000

Employment and Retirement

The declining population of entry-level workers (18-24) for the balance ofthe century and the increasing populationof elderly people may require a revision.of laws and regulations related to olderworkers and retirement.

Even with the growth in privatepension coverage and the increasedincentives and awareness of the need forindividual savings, Social Security isexpected to continue to be thepreeminent source of retirement incomefor the foreseeable future. Currently,the Social Security system is projectedto build huge surpluses during the 1990sand the first decade of the nextcentury. However, increased longevity,low birth rates, and a continued trendtoward early retirement could exhaustthose surpluses during the retirementlifetimes of younger workers who willenter the labor force later in thiscentury.

One of the most significant trendsof the past 50 years has been the declinein labor force participation on the partof the elderly. Currently, there aremany incentives for older workers toleave the work force at relatively young

opy-fluALE

-1-11 k"

IMO ass

OS AND OVID MAO ALOHACINOUSANDM

ages (55-64). Statistics confirm thatleaving the job before age 65 has becomethe norm. Yet people are living longeron the average. By the end of thiscentury, it may be necessary to providegreater incentives for older workers toremain in the work force longer if we areto have enough skilled workers to run ourbusinesses and to support those whocannot work.

Allocation of Health Care Resources

Costs of health care in this countryhave increased at a startling rate foreveryone. However, since the elderlyare major users of health care services,the high rate of inflation in health carecosts has imposed a special burden on theelderly and the government programswhich provide health care for them.

In 1984, t:.e elderly will spend moreof their income on health care thanbefore Medicare and Medicaid began.This proportion is projected to continueincreasing for the foreseeable future.The 1984 report of the Medicare Boardof Trustees also projects a problematicfuture for Medicare. Despite thesignificant cutbacks legislated in theearly 1980s, the Medicare hospital trustfund will run out of funds around 1990 ifno action is taken.

xvi

Congress is considering a number ofmeasures related to controlling healthcare costs generally, with Medicarepayments serving as a target. Thebiggest causes of past cost increasesinclude: inflation; an increase in thenumber of tests, medical services, andsurgical services per patient; use of newtechnologies; and lack of incentives tocontrol costs. Since little agreementexists about the proper mix ofresponsibility among the individual,family, insurer: physician, hospital, andgovernment, the next decade is likely tobe a living- experiment in policymakingaimed .at determining how much servicesshould cost and who should pay for whichservices.

For the next 25 year- most . ofprojected health care cost willbe due not to increases in ;.'ne elderlypopulation but to the same factors whichhave pushed costs up over the lastdecade. After 2010, the senior boom willbegin and the number of people eligiblefor Medicare will climb rapidly.Therefore, it is imperative that the keyto containing health care costs be foundin this century.

Long-Term Care

The number of elderly peopleneeding long-term care is expected torise sharply in the next several decadesbecause of the growing numbers ofpeople over the age of 85 and thegrowing numbers of elderly living atone.

Long-term care is commonlyassociated with medical problems.However, much of the need for long-term assistance is simply related to aninability to perform one or more of thetasks of everyday living (eating, bathing,etc.) rather than to some treatablemedical condition. Since most long-termcare is given at home by the family, theelderly who live alone are especiallyvulnerable to institutionalization.

The need for public help inproviding long-term care is expected togrow because the traditional care-givers

adult women are increasinglyworking outside the home and are not aslikely to be available for full-time carein the future. Currently, public supportfor long -term care is very limited and isbiased toward medical treatment/institutional care and away from homesupport services and family assistance.

z,

OVERVIEW OF TRENDS

Economic, demographic, and socialtrends can be used to paint a generalpicture of the elderly population todayand in the future. The trends shown onthe next few pages are related to the key

characteristics of the elderly populationand sources of support for thatpopulation. The trends create a contextfor the policy discussions which follow.

DEFINITION: In this booklet, the term "elderly" refers toindividuals 65 years old or older. Those 85 years or older arereferred to as "very old".

As we use these terms, however, it is important to notethat one consequence of an aging population may be the needto continue to redefine such terms. The "elderly" population isextremely diverse and "old age" cannot be defined bychronological age alone.

t,

38-861 0 - 84 - 3

(I)

14

r

1.

KEY CHARACTERISTICS OF THE ELDERLY

THE BABY BOOM WILL BE FOLLOWED BY THE SENIOR BOOM.

The number of elderly in the UnitedStates has grown rapidly in the last 20years (twice as fast as the rest of thePopulation). However, for the nexttwenty-five ye#rs, the relative growth ofthe elderly population will be much moregradual. After 2010, as the "babyboomers" begin to reach 65, the "senior

boom" will explode.

In 1960, just 1 person in 10 wasover 65 (16.5 million people). By themiddle of the next century, 1 person in 5is expected to be over 65 (67 millionpeople), a four- -fold increase in less thana century.

PROPCIRTIMI (F THE POPULATION 65 AND OVERAND 85 AND OVER BY SEX 1960-2050

40.1.010.,

!MO

41, /0041.1°.

10134,01.110.1

SO+

1000 Vf0 10#0 1210 240 2190 2020 2010 2040 2930YEAR

VS Bureau of the Census, Current Population ftports,series P-25, No. 921, Po. 9J7( P-25, No. 9j7(Washington, D.C. : MP°, varlons years)/ andThe Statistical Abstract of the United States, 4963.

(2)

15

2. THE VERY OLD ARE THE FASTEST GROWING AGE GROUP IN THE U.S.

At the beginning of this century,about 4 percent of the elderly were 85 orolder. By the middle of the nextcentury, nearly a quarter of the elderlyare expected to be 85 or older. In termsof the total U.S. population, that meansthat more than one American in 20 is

expected to be 85 years old or older inthe year 2050. Life expectancy hasincreased by 27.5 years since the turn ofthe century from 47 years to 74.5years a: increase that nearly equalsthe gain for the previous 5000 years.

GROWTH OF THE VERY OLD AS A PERCENTAGEOF THE ELDERLY POPULATION

85+ as Percent 85+ as PercentYear of All Elderly of Total Population

Number of 85+in Population

1900 4 0.2 123,0001950 5 0.4 577,0001980 10 1.0 2,200,0002000 15 1.9 5,136,0002025 13 2.5 7,700,0002050 24 5.2 16,063,000

US Bureau (if the, Census, "Pupual.ion Est1matcs and ProjokAiom,"Current emulation Reports, Series P-25, No. 922 (Washryton, D.('.:US°;PO, 1982).

4

3. THE ELDERLY POPULATION IS

The life expectancy of U.S. womencontinues to increase faster than that ofmen. Between 1950 and 1982, U.S.female life expectancy increased from71.1 years to 78.2 years (a gain of 7.1years). During the same period, malelife expectancy increased from 65.6years to 70.8 years (a gain of 5.2 years).

INCREASINGLY FEMALE.

About 50 percent of the under-65population is female, increasing to about60 percent of the 65+ population, andabout 70 percent of the 85+ population.This male-female imbalance is expectedto continue to grow. By the year 2000,for example, 73 percent of the 85+population may be female.

4

4. MOST ELDERLY MEN AREMARRIED AND LIVE IN A FAMILY;MOST ELDERLY WOMEN ARE WIDOWSAND MANY LIVE ALONE.

Only 12 percent of elderly menwere widowers in 1982 while 51 percent3f elderly women were widows. Amongthose 75 years old and older, 70 percentof men were married and 70 percent ofwomen were widows. Since women tendto marry at a younger age than men andfemale life expectancy is growing fasterthan that of men, this trend is expectedto intensify in the future.

The percentage of widowed elderlywomen appears to be stable ordeclining. However, the number ofwidows is expected to continue toincrease in the future because of anincreasing differential between lifeexpectancy of men and women.

Over the past 20 years, thepercentage of elderly men living in afamily has remained fairly constant atjust over 80 percent. In contrast, thepercentage of elderly women living in afamily has declined and the pereentageliving alone has risen steadily. Today,about one-third of the elderly live aloneand the percentage is increasing,particularly for women. Eighty percentof the elderly who live alone are women.

MARITAL STATUS CF THE U.S. MERU1980 --1982

20

15

10

rust.: 'stye

Mkt 10000

nao lissYEAR

URIC, 1025

t : f dIf pa-+f r 4.. f .1:T, , :44.1

FAMILY STATUS OF THE U.S. ELDERLY1960 1912

03.

SO'

00"

30

/10.

13

0neo sift 1370 1103 SWId

YEAR. reef Lp a 14 Fel.

I !..e1,. A. VP I It,.

7

5

5. POVERTY RATES HAVE BEENREDUCED, BUT MANY ELDERLY ARESTILL POOR.

In 1972, the percentage of poor andnear poor elderly (under 150 percent ofpoverty) was 38 percent as compared to22 percent for the whole population.Although the percentage of poor andneer poor elderly has been decliningsince 1972, the percentage (30.2 percent)is still higher than for the populationas a whole (25.6 percent) in 1983.

Despite the gains to levels slightlyabove the official poverty line ($1667 in1968, $4626 in 1982), many elderly arestill "just getting by." Furthermore,certain elderly subgroups continue tohave poverty rates two to three times ashigh as the populatiop as a whole.

The elderly sargroups with thehighest poverty rates are among thoseelderly that are growing the fastest:women, the very old, and persons livingalone. Although they are not among thefastest growing groups, blacks" areparticularly vulnerable to poverty in oldage, with a poverty rate about threetimes the rate for elderly whites.Individuals who are members of two ormore of these high risk subgroups aremuch more likely to be poor.

Percentage Of Per kin1502 Of Poverty

N VINA 13)

NJNJ

N'

I Oh 11! Ntl IN NO

bur

91101 COMO 101101% bow OK

1982 POVERTY RATES FOR SELECTED ELDERLY SUBGROUPS

Percent BelowPoverty Level

ElderlySnhgro-..p

15 All Elderly

IS Elderly Women

28 Elderly Living AloneElderly Blacks

66 Elderly Black WomenLivIny Alone

sower: US Bureau of thy Census, (ove,?ry DivisionUnpublished Data, 2984.

18

t;

6. OLDER CITIZENS TEND TO HAVEMORE ACTIVE VOTING PATTFRNSTHAN THE YOUNG.

In the last five presidentialelections, the peak voting group has beenthe 55-64 age group (roughly 70 percentvoting), with the 45-54 and 65-74 agegroups vying for second place. Over thissame period, citizens 75 and older votedin greater proportion than the under 25age group.

These trends in voting patterns areexpected to continue perhaps intensify

in the future.

TEE GENT VOTING IN PRESIDENTIAL RIECTIONNEY AGE GROUP

1964.19R

MAR

,.

o a ioPERCENT

N

7. Till. FUTURE ELDERLY WILL BE BETTER EDUCATED.

In 1982, more than 40 percent ofthe elderly had finished high school, incomparison with less than 20 percent ofthe elderly in 1960. There werecomparable increases in the percentageof college graduates. Since more oftoday's under-65 population are finishinghigh school and going to college, and theMedian number of years of schooling is

EDI LAI /1 (IF ULDERI AND 11 Tl RE ELDERLYHY RACE AND '41*lNISII 0111(.11, 1980

Mo

so.

a..

FLa2-, sforestill44511"dmal

Ni

25-44 45-64 65 +AGE IN 1980

increasing (now over 12.5 years),tomorrow's elderly are expected to bebetter educated than today's.

Better education is importantbecause it is related to other factors:those who are better educated tend toearn more in their lifetimes and to stayin the work force longer.

ED(CATON OF ELDERLY AND FUTURE ELDERLYBY RAM AND SPANISH ORIGIN, PM

F

5

75-44 45 -64AGE IN 1980

SOURCES OF SUPPORT FOR THE ELDERLY

Prior to the establishment of theSocial Security system, the primarysources of support for the elderly wereincome from family and employment.Since the 1930s, most experts havetended to discuss retirement income as athree-legged stool made up of SocialSecurity benefits, savings, and pensionsdespite the fact that earnings fromemployment have provided a greatersource of income than all other sourcesexcept Social Security. In the nextcentury, income from employment willbecome an even more important andbetter recognized source of income forthe elderly.1. SOCIAL SECURITY WILL CONTINUETO BE THE LARGEST SINGLE SOURCEOF INCOME.

More than 9 out of 10 of the elderlyreceived Social Security benefits in 1981,with 65 percent relying on SocialSecurity for half or more of their totalincome.

The importance of Social Securityincome increases for the elderlysubgroups who are most vulnerable: thevery old, clacks, and women livingalone. In 1981, Social Securityaccounted for about 37 percent of moneyincome for the average elderly individualand for nearly 80 percent of the cashincome of the low-income elderly (thosewith incomes of $5000 or less). One-fifth of the elderly living alone and two-

17 )

fifths of the black elderly living alonereceived 90 percent or more of theirincome from Social Security.

A majority of elderly families canexpect over half of their income to comefrom Social Security at the turn of thecentury.

IttlATIVE SIGNIFICANCE Or SVURCFS OF IKINEY INCOMEFOR niE ilDtittY"

1962 t907 1976 1078 HMO muTEAR

20

8

2. EARNINGS CONTINUE TO BE ANIMPCRTANT INCOME SOURCE.

Even though there is a growingtrend toward early retirement, earningsfrom employment continue to be thesecond largest single source of incomefor the elderly (25 percent of income forall elderly in 1981). As the level ofincome decreases, so does thecontribution of earnings.

Future trends related toemployment income for individuals 65and older will be addressed more fully inthe chapter entitled "Employment andRetirement."

3. ASSET INCOME MAY BECOMEMORE IMPORTANT TO HIGHER-INCOME ELDERLY.

In 1979, only about 6 percent of theelderly received income from savings andother assets and most of them reportedless than $1,000 of income from thatsource. However, since income fromassets amounted to 20 percent of theoverall income of the elderly someelderly do have significant savings.

Future retirees may have a betteropportunity to build assets due to theliberalization of the eligibility rules forestablishing Individual RetirementAccounts (IRAs). Use of IRAs increasedfrom 3.4 million (7 percent of thoseeligible) in 1981 to 12.1 million (17percent of those eligible) in 1983.

Although the long-term impacts onsavings are still uncertain, initial studiesindicate that IRAs may not beencouraging savings andinvestment. In 1982, more than half ofall funds placed in IRAs came fromcurrent savings rather than new savings.

Research shows IRA use:

o is concentrated among high incomegrouPs;

o is not as evenly distributed acrossincome levels as employer-sponsoredPensions;

o increases with age;o is more likely to be selected by

women than men.

In sum, even though IRAs couldhave a positive effect on the assetincome of future retirees overall, IRA'sprimary effects would be concentratedon today's upper income group.

4. ABOUT HALF OF PRIVATE SECTOREMPLOYEES ARE COVERED BYPENSION PROGRAMS; ABOUT ONE-FOURTH WILL RECEIVE PENSIONS.

As of 1983, about 50 percent of allprivate industry employees 18 years oldand older were covered by pensions intheir current jobs. That percentage isexpected to be stable for the foreseeablefuture. If past behavior continues, abouthalf of the covered workers or one-fourth of all workers can expect toreceive pensions when they reachretirement age.

Among today's elderly, about 28percent of men and It percent of womenactually receive pensions. Averageannual payments are about $4200 and$2400 per year, respectively.

Labor unions have been a majordriving force behind the establishmentand growth of private pension plans inthe past. Union membership has beendeclining in recent decades and many ofthe new "knowledge" industries are lessunionized than the basic industries. Tothe extent that union membership is anindication of pension coverage, thepercentage of pension coverage is notexpected to grow greatly in comingyears.

21

9

On the other hand, greater numbersof women in today's workforce will resultin more elderly women in the future whohave pensions of their own. Between1979 and 1983, 3.3 million women wereadded to the non-agricultural labor forceand 1.2 women gained entitlement tofuture retirement benefits. However,many women workers still have workpatterns and occupations that do not leadto maximum pension coverage. Recentchanges in laws affecting pensionprograms could also cause the number ofpeople covered by private pensions togrow somewhat (e.g., requiring acompany to continue to vest workersduring maternity or paternity leave,lowering the age at which work countstoward vestirg, and allowing pensions tobe allocatel as part of divorcesettlements).

This topic is discussed more fully inthe section entitled "Employment andRetirem int"

S. TODAY, FEW POOR ELDERLYAPPLY FOR PUBLIC ASSISTANCE;TOMORROW, MORE ELDERLY MAYAPPLY.

Very few elderly people participatein public assistance programs today and

only a small portion of cash incomecomes from that source. In 1981, onlyhalf of the elderly with incomes belowthe poverty line received publicassistance.

The Supplemental Security Incomeprogram (SSI), a federal program withstate supplements, provides most publicassistance income for the elderly, butthis program has a very low elderlyparticipation rate. The reasons for lowparticipation by the elderly in publicassistance programs are not fullyexplained. In part, low participation issaid to be caused by an inability to dealwith the system and by an unwillingnessto accept "welfare".

In addition to cash contributions,the government provides benefits to theelderly in the form of medical care, foodstamps, publicly-owned or subsidizedrental housing, and energy assistance.These benefits have expanded markedlyin the past few years, from $10 billion in1971 to over $60 billion in 1983.

The future elderly, who will havegrown up with much greater exposure topublic assistance programs, may be moreadept at dealing with the system andmay feel less stigma from accepting suchassistance.

tf ,001.. 1.4 tAt ,rtt i

to !ex'EC vkll,

atid*LE f. gy .1 11, 14,1 0,1 1.1g g

4.1 S. do

... :.44

AL.

10

8. SOURCES OF ELDERLY INCOMEARE RELATED TO INCOME LEVELS.

Elderly people with low and moderateincomes most of the elderly get themajority of their income from SocialSecurity. At incomes above $12,090 peryear, earnings become an importantincome soiree.

7. ELDERLY INCOME IS MODEST;HALF OF WOMEN AND BLACKS AREBELOW $5000.

On the average, income for elderlyindividuals is modest, but men have muchhigher incomes than women, and whiteshave much higher incomes than blacks.

In 1981, about half of elderly Waitewomen and black men and 80 prentof black women had incomes below$5000,

WARSVS it.tldb at the cremes. S.11.* P^60.NrofrqtsviA4teml. ormsturivroo. a.c.r wmtighalOWsg.

=Rolm INCOME SOURCES FUR 1NUYMUAIS AGE 06 AND OURBY INCOME 'EMS 1978

AM.

SO.+

20"

SIMevawmweamim

as IwoC2 ==MP MD

YOTAL MOW

President's Commis/Lion on Pension Policy, Ceetna_of

romard illtionei Retirement receer Police, 2981 81nAl

Report. feaskingtono D.C.: 1982).

23ft.,

w's

EMPLOYMENT AND RETIREMENT

Concerns over the future costs ofSocial Security, federal retirement andother income programs for the elderly,lead policy-makers to consider ways toprolong labor force participation. Anyincentive to keep older workers in thelabor force must compete successfullywith the growing trend of earlyretirement. On the other hand,provisions such as those in the 1983Social Security Amendments to raiseretirement age from 65 to 67 after the

turn of the century may penalize thosewho, because of health, discrimination,or unemployment, are forced to retireearly with reduced benefits.

A key policy question for the futureis how to provide cost-effectiveincentives to an increasing proportion ofhealthy elderly who can work in aproductive economy free of agediscrimination and without penalizingthose who must retire early.

24

12

WHAT ARE THE FACTS?

MEN ARE LIVING LONGER, BUT RETIRING EARLIERWOMEN ARE WORKING FOR PAY LONGER

Life expectancy continues toincrease. By the year 2000, men canexpect to live 10-15 years after reachingage 65 while women can expect to live15-29 more years. Physical and mentalcapabilities do not automaticallydeteriorate at 65. So, for an increasingproportion of people, life after 85 can beproductive and less constrained byfunctional limitations. Accordingly, thenumber and quality of years that personsover 65 can expect to live has prompteda review of what constitutes "normal"career and retirement patterns.

As men live longer, they arespending a smaller portion of theirlifespans in the labor force even thoughthe number of years they work islonger. For example, a man born in 1900could expect to live about 46 years. Hewould work for 32 years (69 percent) andbe retired for only about 1 year (3percent). A man born in 1981 can expectto live about 70 years. He will work for38 years (55 percent) and be retired forabout 14 years (30 percent).

In 1983, the labor forceparticipation rate for elderly men stoodat 17 percent down from 46 percent in1950. From 1970 to 1983, the rate formen aged 55-to-64 dropped from 83percent to 69 percent.

Women are both living longer andworking for pay longer than theirpredecessors. As women live longer,they are spending a smaller portion oftheir lives in child bearing and rearing.A woman born in 1900 could expect tospend 18 years of her 48-year lifespan(37 percent) bearing children; a woman

t'

YEARS OF LIFE REMAINING AT AGE 65950-2050

YEARkota,m1 nn.irn set%isAssi,

1.4?. 4,43 3W,mAir4

V: at tq.. f th. t. twynty

PROPORTION OF LIFE SPENT IN GAINFUL EMPLOYMENTFROM AGE 211k 1910-10119

:cApt ve, SW I 1, h. Slat r ley m ?tarsi:Ws W. thenlvettl.

Mait4U of i,.Mr Se*Clolf406, `GnatDry.lnpainnts in dinalch-State 1,4Wi2P9 14te

OMERNiulton, 0.c., Vh&VO, n.4.1 .

25

13

born in 1981 can expect to spend only 10years of her 78-year lifespan (13 percent)bearing children. In the future, more ofthe job of rearing the children will beshared with others.

Women's labor force participationreached a new high of 52.9 percent in1983 (48.5 million women), up from 52.6percent in 1982. This is a slower rate ofgrowth than in the decade of the 1970swhen there was an increase of more than1 million won en every year. Middle-aged women (45-54) have increased theirlabor force participation rates from 38percent to 62 percent since 1950. Therate for women aged 55-64 went from 27to 42 percent. The overall female laborparticipation rate is projected to reach65 percent by 1995. The increases inlabor force participation among youngerand middle-aged women have not beentranslated into an increase inparticipation at the upper ages. As of1983, only 7 percent of all women 65 andolder were in the labor farce, downsomewhat from the 10 percent of 1950.

There are ntunerous factors in anindividual's decision to retire, but thedecision tends to be based primarily onhealth status and the availability andlevel of p9tential retirement income.Mandatory retirement rules probably donot account for much of the male laborforce withdrawal since the trend towardretirement is pronounced in the pre-65labor force.

QvBisit LANK PINCE PARMR131224MI MEN 1,48 leas

MYEAR

esigeay ,f 4t44;t1, a. 'Rt. ftitTic-We to Lab,' A.g4.4 Part it ipatiosrNate' A ChAttb0Pit,' fh4,th)tolt04,

1.1V

CIVILIAN LABOR FORCE PARTEIPATIC*1 RATESPrat WCOIEN: 1948 --1983

sao

so

oo.

TO-

SO-

GO-

so.

65*

n o ale ass sas tanYEAR

.(7 Autenr.. td Za46It . t7'trtath I f 1'4 pdt . rritat A NA, f 4.# ." flie*?trqt,o, j..:'V:,4,11^. I VIM/

26

14

WHAT ARE THE FACTS?

U.S. LABOR FORCE WILL CHANGE DRAMATICALLYIN THE NEXT DECADE

Labor force growth for all of thiscentury is Likely to be very differentfrom the pattetn of the 50s, 60s, and70s. Nearly all the growth in the nexttwo decades will be middle-aged adults.Between 1980 and 1995, workers aged25-54 will increase by almost 30 millionwhile both younger and older age groupswill decline. The number of workers 16-24 will drop by over 4 million.

Experts do not agree on the effectsof these growth patterns on theemployment of older workers. Someanalysts argue that the impendingshortage of young workers will be anincentive for employers to retain or hireolder workers. Others argue that theenormous increase in workers in theirprime working years could be a "surgefrom below" that will tend to push olderworkers out of the 'abor force.

LABOR FORCE GROWTH fIN' THE POPULATUN

BY AGE 1955 1995I

4

S.

.41iso 1Y00 0118 Int WM WOO *000 WOO MO

54suton,

A

F44:wrro. 14.ww[4, .cal Oofto rierbotTwc. *Mt VW

44a.0 IW.A, A !ie....04 &ant.' ifuntAtiLpebur arwiew,ok trvv.i of Iwbbot VTAtiettiv. Agovfmter

WHY IS TI ISSUE DIFFICULT?

EXPERTS DISAGREE ON THE ECONOMY'S ABILITY TO CREATE JOBS

The economy of the United Stateshas been in serious straits for the lastten to twelve years, with lowerproductivity growth, sharper competitionfrom abroad for markets, sharply higherenergy prices, high inflation and highunemployment. Federal budget deficitsare at historical high points. Businessand government leaders have beenstruggling to find the mix of policies thatwill lead to economic growth and fullemployment. In this environment,projections about the longer -termperformance of the economy areextremely uncertain.

()neat the central uncertainties inthe jobs debate is the potential impact oftechnological advances on jobopportunities. Some analysts predictthat the introduction of new technologieswill result in many new jobs. Otheranalysts predict that the newtechnologies will produce a net job loss.

In an expanding economy, much ofthe concern about jobs asappears, butfew economists anticipate a return tothe unprecedented growth rates of the1950s and 1950s, when a rapidlyexpanding economy and low inflation

15

provided jobs for almost all who wantedthem and improved retirement benefitsfor those who wanted to retire. Butsome economists are projecting dramaticexpansion for the economy toward theend of this century. If the economyshould expand rapidly, the older moreexperienced workers could be leading theboom. According to some, employmentin the service sector may grow by 31percent between 1981 and 1980. Eventhough the goods-producing industry willgrow more slowly, employment there isexpected to grow by 13 percent. Amongoccupations, the Bureau of Labor

Statistics expects growth to be greatestfor professional and technical workers,service workers and clerical workers.

The uncertain economic future isbringing considerable disagreement onwhether a sufficient number of jobs willbe available through the end of thecentury to accommodate the availablesupply of workers. With a bumper cropof middle-aged workers on the horizon,many question whether it would be wiseto provide incentives that encourageolder workers to stay in the labor force.

PROJECTED GROWTH OF OCCUPATIONS AND CURRENTELDERLY PARTICIPATION

t t I

Bdork as ilkof OccupationalWorkforce 1181

Total

Professional - ',technical

Managers AdministritiveSales

Clerical

CrifstworkersOperathres

Non-ftrin laborers

Private household

Service

Forrnworkers

t I .1 a I JIi-88 -80 8 to ae

Projected Growth of Occupadons I%)12111.1910

Source: Max, Carey, "Occupational Employment GrowthThrough 1990," Monthly Labor Review, August1982.

28

16

WITT IS TI ISSUE DIFFICULT?

DEPENDENT POPULATION WILL GROWAT FASTER RATES THAN WORKING AGE POPULATION

The conventional way of looking atthe burden on workers is through the"dependency ratio" or "support ratio".This ratio compares the number ofpeople of "working age" (18-64) to thenumber of dependent young (under 18)and the number of elderly (over 64).

Although there will be a slightincrease in the ratio of those regarded asdependents to those of working age, thedependency ratio looks promising overthe remainder of this century. Manyanalysts believe that continuing low birthrates in the coming decades willcompletely offset the increase in elderlycitizens so that the total number ofdependents will remain stable.Nevertheless, since elderly dependentsrequire more resources than anequivalent number of dependent children,there will be increasing demands uponthe working age population.

After the year 2010, the seniordependency ratio may become a problemfor Social Security. For example, theSSA projects that the ratio of tax payersto beneficiaries will have dropped from3,2 in the early 1980s to 2.2 by 2025 adecline of about one-third.

DEPENDEIC'Y RAT33S (W THE US PCPULATI)N1900 2050

PfinAeloa wortber or Pterl4rop. x leNumber or NbrAibu Ave

"41.1.4117 ,1 ,NKWPWA, 'fkl,a0tIoh nalaWly.

m.e1.41 S.-1,, M.. 44,W llsobaratl,q. D.C.? Cht.V.,,

17

WHY VI THIS ISSUE DIFFICULT?

RETIREMENT AND PENSION POLICIES AND ATTITUDESMAY BE BASED ON YESTERDAY'S STATISTICS AND EXPECTATIONS

Earned Benefits

The Social Security and Medicaresystems are financed on a pay-as-you-gobasis, as is the pattern in most developednations. Current benefits are fundedfrom current income rather than frompayments contributed by and for thoseindividuals during their working years.This system worked well in the climateof economic prosperity following WorldWar II when the number of workerspaying into the system was growingrapidly and the number of retirees waslow. However, such programs will beadversely affected by poor economicenvironment, the higher elderlydependency ratio, and the increase in thelife expectancy of retirees during the1970s.

Congress has passed legislation toincrease income to the system and overthe next three decades to build up asurplus for the senior boom in the nextcentury. Between now and 2010, therewill be only a moderate growth in thenumber of Social Security beneficiaries.With the increases in payroll taxesalready scheduled, a surplus shouldaccrue in the Social Security Trust Fundthat would provide adequate support toSocial Security retirees into the nextcent ury.

Since they have paid into thesystem over many years, most SocialSecurity recipients look at their benefitsas earned benefits. At the same time,however, the average beneficiary willcontinue to receive more from SocialSecurity than is contributed in payrolltaxes.

38-861 0 - 84 - 5

Early Retirement

In the 1950s, many pensionprograms were changed to encourageolder workers to retire, in the belief thatthe total number of jobs in the economywas fixed and younger workers neededjobs the most. Even though the U.S.economy has created jobs at anexceptional rate in the 1970s, and eventhough the number of elderly non-workers has increased dramatically incomparison to the numbers of workers ofall ages, many people continue to believethat it is better to move older workersinto retirement to "free up" jobs foryounger workers.

Many companies use variousincentives to ease their workers age 55and over into retirement. With theupcoming growth in the workforce aged35-54, there will be less room at the topthan usual and more competition formid- and high-level positions. Suchcompetition may intensify the feelings ofyounger workers that the older workersshould leave and "make room" for thenext generation. In medium- and large-sized firms, more than 90 percent ofwhite- collar workers can retire by age55, if they have served the requirednumber of years. Among blue-collarworkers, 80 percent could retire by age55. Some companies supplement theearly retiree's income until he or she iseligible for Social Security benefits.

Other incentives include:

o A growing perception that theeconomy may not get better and that the

30

wiser course of action is to retire with abetter benefit package than might beavailable at some later time. (However,the perception is somewhat offset byuncertainty in the economy and fears ofwhat inflation might do to a fixedretirement pension.)

o Older workers in low wage jobs tend toretire earlier as the Social Securitypayments replace a larger proportion oflow wage earners' pre-retirementincome.

o Only a small proportion of privateretirement plans (6 percent) increase thesize of pension or monthly payment toaccount for working beyond the normalretirement age. (Social Security, forexample, provides only a slight credit fordelayed retirement.)

Coverage

Labor unions have been a majordriving force behind the establishmentand growth of private pension plans inthe past. Union membership has beendeclining in recent decades and many ofthe new "knowledge" industries are lessunionized than the basic industries. Tothe extent that pension coverage isaffected by union memberstip, thepercentage of coverage is not expected

18

to grow greatly in coming years.

On the other hand, greater numbersof women in today's workforce shouldresult in more elderly women in thefuture who have pensions of their own.Recent changes in laws affecting pensionprograms could also cause the number ofpeople covered by pensions to growsomewhat (e.g., requiring a company tocontinue to vest workers duringmaternity or paternity leave, loweringthe age at which work counts towardvesting, and allowing pensions to beallocated as part of divorcesettlements). However, many womenworkers still have work patterns andoccupations that do not lead to maximumpension coverage.

Effects of Inflation

Very few private pension plans(only about 3 percent) provide for cost ofliving increases. Yet an annual inflationrate of 5 percent for 15 years can erodethe real value of private pension benefitby about one-half. An inflation rate of10 percent for 15 years would reduce thebenefit to one-quarter of its originalvalue. Inflation is the greatest threat tothose who depend on private pensions andassets.

31

19

SUMMARY

The employment and retirementdecisions of the elderly and near-elderlycould have a major impact on thesolvency of pension and Social Securityprograms. Unfortunately, there is majoruncertainty about the economic future ofthe country and about the combinedeffects of countervailing trends.

On the one hand, we should expectto experience increased public costs ofretirement as a consequence of increasedlife expectancy and a continuation of anhistoric trend toward earlierretirement. On the other hand, ashrinking supply of entry-level youth and

the potential need for greater experienceand skill in the workforce may lead to anenhanced receptivity to maintainingolder workers in the workforce.

Experts disagree as to projectionsabout the overall economic future,inducing the nature of the futureworkforce and labor demand byoccupation and industry. It may benecessary to monitor and analyze theinteractions of a broad spectrum ofdriving forces before it will be possibleto develop coherent public policies inthis area.

UNANSWERED QUESTIONS

1. How do we define "a reasonablestandard of living" for the elderly?

2. What is the appropriate degree ofpublic-private coordination with respectto retirement policy?

3. What is the purpose of SocialSecurity? Should it provide a minimumbenefit level or be used as the primaryretirement income?

4. What are the trade-offs betweenadequacy and equity in our retirementincome system?

5. Will present contributors to SocialSecurity payroll taxes receive what theybelieve to be a fair rate of return whenthey retire?

6. Can workers be expected to assumegreater responsibility for their ownretirement support?

7. To what extent do higher payments toSocial Security payroll taxes substitutefor other savings or investment byemployees, by employers?

8. What is an appropriate mix of publicand private sources of income? Whatportion of retirement income should beearned by saving, investing, or payinginto Social Security or a pension plan?

9. Should the government attempt toprovide incentives or disincentives toemployers that will result in morewidespread participation in privatepension programs? Greater incentivesfor individual savings?

32

20

10. As a result of changes in the agecomposition of the labor force and otherfactors, what will be tip demand forolder workers? Will there be a need toencourage their continuation in the laborNoce? Will older workers be asked toperform entry level jobs usually filled byyounger people?

11. How will increased introduction ofrobotics and automation impactproductivity, quality of life, and thenumbers and types of employees invarious industries and occupations?

12. What kind of jobs will characterizethe economy of the future? Will olderworkers be suited to those jobs? Couldthey be retrained?

OPTIONS

The option statements presented onthe next few pages are intended tostimulate thought and discussion. Theyare not comprehensive, nor are theyendoried by the CongressionalClearinghouse on the Future, the HouseSelect Committee on Aging, or any other

organization or individual involved in thepreparation of this report. Their solepurpose is to introduce the reader to thevariety and scope of options that havebeen raised in this area, so understandingand useful debate will be enhanced.

33

/

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

ISSUE AREA EMPLOYMENT AND RETIREMENT

OBJECTIVE: Pro de neentives remove ,centives for older workers who want to stay inthe labor force and maintain styply of workers.

ILLUSTRATIVE orriosEneourage the increased avail-ability of part-time employ-ment and other flexible workoptions for older workers.

ILLUSTRATIVE OPTION 2 ILLUSTRATIVE orrioN-3-

Further liberalize the penaltypaid by arrant Social Securityrecipients under 70 with annualwages above $8980.

Provide greater incentives to encourageprolonged labor force participationby increasing the erect given fordelayed retirement beyond that incor-porated in the 1983 amendments.

PROS PROS PROS

I. Maintains skilled workforceadequate for producing goodsand services for the nation.2. Softens shock of retirement(psychological an possibly,financial).3. Older people who work tendto have higher living standardand cushion against inflation.

CONS

1. Would remove penalty forworking.2. Could encourage delayedretirement.3. Would increase revenues fromincome taxes.

1. Would encourage delayed retirement,but allow early retirement.

CONS

1. May reduce the number ofJobs available for the youngerpopulation.

1. Would benefit the mostaffluent of the elderly.2. Would require significantadditional federal outlays ($2billion in 1984).3. Might have little impacton elderly labor forceparticipation.

1. Would increase costs.

CAUflON: The options shown home are not endorsed by the House Select Committee on Aging or the Congressional

Clearinghouse on the Futta they are presented for information and discussion only.

ISSUE AMA: EMPLOYMENT AND RETIREMENT

oBJECrrvE: Provide incentives and-remove disincentives for older workers whowant to stay in the labor force and maintain supply of -,4orkers.

ILLUSTRATIVE OPTION 4

oster more 51 me emwent on the part of women,and/or revise immigrationpolicies.

*.

PROS

1. Could offset shrinIdngpool of young entry-levelworkers.2. Could avoid need to reversetrend to earlier retirement,maintaining freedom of choicefor elderly.

=11.1111.CONS

1. Immigration policy is asensitive and controversialissue.

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

OBJECTIVE: Minimize hardshipto elderly due to technologi-cal innovation, eta.

ILLUSTRATIVE OPTION i

Devise retraining incentives(e.g., tax creclits to employ-ers), to enhance employabilityof older workers.

ROUE AREA: EMPLOYMENT AND RETIREMENT

OBJECTIVE: Spread the costs:old benefits of Social Securitymore evenly across society.

ILLUSTRATIVE OPTION 1

OBJECTIVE: Improve the financialposition of the Social SecuritySystem.

Change the basis for SocialSecurity funding so that it isfinanced equally by the em-ployee, the employer and theFederal Government instead ofby the first two only.

ILLUSTRATIVE OPTION 1

Make Social Security a moreprogressive program by increasingbenefits to lower income groupsand decreasing them for higherjirpoPs

PROS PROS PROS

O fO n I

work force.2. Would increase supply ofmarketable workers.

0 ar 71 _

slaltde payroll tax onemployer and employee.2. Perceived savingsmight be 'wed by employersto expand private pensionsystems, lire ackUtkmalworkers, end invest in theindustry.

governor2. Would focus resources on thetruly needy.

CONS CONS CONS

L Could increase costs.2. Employers tend to take onlyhe "cream", not those most inseed of retraining.

L Would mask long-termsolvency problems of SocialSecurity system.2. May erode workers,perceptions that benefitsare directly linked totheir employment.

1. Politically explosive.2. Would violate existing "contracts ".

w's

MEE

ALLOCATION OF HEALTH CARE RESOURCES

Costs for health care in thiscountry have Increased at a startlingrate across the board, not just for theelderly. However, the elderly populationis a major user of health care servicesand, because the elderly population isincreasing particularly the 85+ group

there are fears:

o Fears on the part of the elderlythat as out-of-pocket tatalth carecosts continue to increase and ascurrent health care support isreduced, they will be unable toafford the care they need.

o Fears on the part of the young thatby the time they becomebeneficiaries of Medicare, thesystem will be insolvent or

restructured, and they will receivefewer benefits than do currentbeneficiaries.

o Fears on the part of Congress andthe Executive Branch that risinghealth care costs will lead toinsolvency of the Medicare TrustFund or to larger federal budgetdeficits, or both.

This is an area in which we do nothave the luxury of lead-time: theproblem is immediate. It is also an areain which there are no clear, easyanswers. Congress will, have to struggleto balance issues such as governmentregulation, quality, freedom of choice,effectiveness, efficiency, and equityacross society as it makes policy in thisarea.

I25) 37

26

WHAT ARE MEDICARE AND MEDICAID?

MEDICARE

Medicare is a federal program that was created in 1965 to help pay thehealth costs of older Americans and the (babied. AU elderly Social Securityand railroad retirement recipients are eligible for Medicare. Elderlyindividuals who are not entitled to automatic hospital coverage may purchasethe Hospital Insurance.

Medicare Part A (Hospital Insurance or Hi) covers hospital costs, hospicecosts and short term (less than 100 days) nursing home and home healthcosts. Part A is financed by a portion of the Social Security payroll tax.Recipients are responsible for a $356 annual deductible and for copaymentsdaring long hospital or nursing home stays.

Medicare Part B (Supplemental Medical Insurance or SMI) covers physicianservices, hospital out-patient services, laboratory, and other medicalservices. Part B is partially financed (25 percent) through monthly fees paidby the recipients and partially (75 percent) through general tax revenues. In1984, recipients paid $14.60 per month. Recipients are responsible for a $75annual deductible and 20 percent coinsurance on covered services.

In addition to the limits on long-term care and home care, Medicare doesnot cover eye examinations and eyeglasses, hearing examinations and hearingaids, drugs, and routine dental treatments and dentures.

MEDICAID

Medicaid is a federal and state program that helps certain low-incomeindividuals of all ages get medical care. Eligible individuals include recipientsof Aid to Families with Dependent Children (AFDC) and SupplementalSecurity Income (SSO, and may include those receiving other cash assistanceor needing nursing home care. In 1980, 16 percent of Medicaid recipientswere elderly and 37 percent of program costs were for elderly recipients.

Medicaid covers a wide range of medical services includinghospitalization, physician care, laboratory, and x-rays, Unlike Medicare,Medicaid pays long-term nursing home costs. Nursing home costs representabout 75 percent of the Medicaid costs for the elderly.

As of 1981, the federal government was paying 55 percent of totalMedicaid costs. In that year and several sisequent years, Congress voted toreduce federal payments to the states for Medicaid, Although thosereductions are scheduled to end as of fiscal year 1984, the percentage thefederal government will pay of total Medicaid costs is expected to remain inthe 55 percent range.

38

27

WHAT ARS THE FACTS?

HEALTH CARE IS TAKING MORE OFOUR NATIONAL INCOME.

National health care costs for allservices, for people of all ages havebeen growing faster than our nationaleconomy for many years. In 1960, about5 percent of our Gross National Product(GNP) went for health care; in 1983,nearly 11 percent of GNP went forhealth care. Total national spending in1984 will be about $350 billion. Aboutone-third of that total ($120 billion) willgo to meet the health needs of theNation's 28.5 million elderly citizens.

HEALTH CARE IS TAKING MORE OFTHE FEDERAL BUDGET.

In 1970, about 9 percent of thetotal Federal budget went for healthcare; in 1985, about 11 percent of thebudget will be for this purpose.Medicare payments alone have grownfrom less than 4 percent of federalbudget outlays in 1970 to an estimated6.7 percent in 1985.

HEALTH CARE IS TAKING MOREDIRECTLY OUT OF THE ELDERLY'SPOCKETS.

In 1984, elderly individuals willspend an average of $1526 out of theirown pockets (including Medicarepremiums), about 15 percent of theirtotal income. This is a higher proportionthan they were paying before Medicareand Medicaid were (sleeted, and willcontinue to increase in the future.

NATIONAL HEALTH COSTS AS PERCENT OF GNPtumor wasormi rrimono

X

GNP

two swa rimsUMW

%SOO ION

. . : Kid R Mn 31,1.41 k.71 X.67a a.6.7%!t pap4 Nek. Paral je M. ate Its. wt # i4a

o.,.1 AP /.saw. Aehil f A Rakart.to trig .44 w., d.Pry N 414 1 .I Avsi. t Nw. -NW ..$4

OUT-OF-POCKET HEALTH CARE EXPENDITURESFOR PERSONS AGE 65 AND OVER PER CAPITA

1966-11114

WOO

WOO

ineludes private innuranor. premiumsand premiu* for supplesestarii nmtien2innutars,v paid by the elderly

ROO

IMO *N ace VOA IWO *35 WOO WOO OWO NIAIIUNN

Soux.r: Hearth Care Financing Atbmindatratido, Armes ofDate Namagement and Stratum', Aerslib Cate ..51,mr#-

itsALOWIletin, hely 201041 and Suborn Gibson andluslut40 Ihrettler, 'Offterumcwo by Apo Grow, inHealth Cara Spending,. Social Security Bulletin,June 2976, and office of Financial end Actuarialiinalusta, Juneau of Aare Managmeent and GtferegiirRemit!: Care financing AdMimiatratioar July

39

28

WHAT ARE THE FACTS?

MEDICARE COSTS COULD MORE THAN DOUBLE BY 1990MEDICARE GROWTH WILL CONTINUE AT A SLOWER RATE

Medicare and Medicaid are the twofederal programs which have financedlarge portions of the health care servicesfor the elderly. From relatively modestbeginnings, both of these programs havegrown to major proportions. Forexample, Medicaid paid a little over $1billion in support of the elderly in 1972and almost $6 billion in 1982. Medicarehas grown from $4.7 billion in 1967 to$52.2 billion in 1982. Projections to theyear 1990 show an increase to $132billion in Medicare spending. Though theincrease is high, the average rate ofincrease for the 1982-1990 period isexpected to be less than 12.5 percent -a much lower rate than the average forthe 1975-1142 period of 18.9 percent.

Despite recent increases in cost-sharing, new cost-saving provisions, anda reduced rate of inflation for medicalexpenses, Medicare costs are stillexpected to grow at a rate faster thanthe economy, the elderly's income, or thefederal bucVet during the 1980s. TheHospital Insurance Trust Fund ofMedicare (Part A) is expected to bedepleted by the end of the decade. Thetotal costs of Medicare Part B areexpected to increase by nearly 16percent per year through 1988, muchfaster than elderly income, the economy,the federal t = or general taxrevenues. Th both t elderly and theentire Medic progr are expected tobe in financi difficulty by the end ofthe decade.

0

VILINSVITEM

196719681969197019711972197319741975197619771978197919801981

1982

195419671990

IENEFIT PAYPENTS 1967-1990

TOTAL 558541. NOWA.PAYMENTS PERCENT(5,1) CAMME ESA

------------

4.5 ....... 3.1

..7 26 3.86.6 16 4.57.1 8 Si7.9 11 5.7

8.6 10 6.4

9.6 11 7.1

12.4 30 9.3

15.6 26 11.618.4 ta 13.8

21.8 18 16.3

24.9 15 18.4

29.3 18 21.2

35.7 22 26.0

43.5 22 31.3

50.9 17 36.3

66.566.5 14 46.1

94.7 12 64.6

131.5 124 88.7

RONALPEAIINTNAME

-- - --

71201:1311123025181814ISFt2116

131211

SUM40Mt #4.4.:th Cate? Vismortug Adhlumatr4tion. thalvone

ASV! Monatimment and Strategy, Uffive ..f 1,4**nsi4;

And ktmeraal Amlots, *Ad N. Plerburd and C.

SChdadier. PO.Sir.kklinrinatiCtr.titftVIMN,, sprAng

111$4. Yahoo t, motor 1,

SURPLUS/DEFICIT R4 MEDICARE PART Aisemottas Immorams. Tram, food 11161610 II s -t11l.t

&...l Coftaisswo

SuroluseDePtclt $4.0~8esisi{

IMPS LPN 1004

Stn.nual\-.

Cumu 1 t odk

SOH 1100 I'll Sired 19118

1411011

r onto. t.q4 . tno Pntlw n b.rfet a,. n NIA.

. ev 1,4 keAbir el 1., IA* . I Se sir V

Alir, re. I vt, 1

40

29

WHAT ARE THE FACTS?

THE i:LUERLY NEED AND SPENDMORE ON HEALTH CARE THAN THENON-ELDERLY.

The elderly have more severe andchronic illnesses and more disability thanthe non-elderly. As a result, the elderlyas a group accounted for about 11percent of the overall population andabout one-third of the nation's healthcare costs in 1981. Per capita healthcare expenditures were estimated at$828 for persons under age 65 and $3140

for persons 65 and over. Even whennursing home costs are removed from thecalculation, per capita expenditures forelderly individuals in 1981 were stillthree times those for the youngerpopulation.

A SMALL GROUP NEEDS A LARGEAMOUNT OF CARE AND ACCOUNTSFOR A MAJOR PORTION OF COSTS.

Most health care costs occur duringthe last two years of life, regardless ofthe age at death. Since the majority of

deaths occur in the elderly population,this is one major reason why the elderlyaccount for a high proportion of overallhealth care costs. Even among theelderly, however, nearly alt (95 percent)live in the community in a given year anda large majority of these (75 percent)spend less than $1000 per year on healthcare services such as hospitals and homecare.

A very small group of the elderlyaccounts for a large proportion of theexpenditures. In 1980, for example, 5percent of the elderly accounted for 22percent of elderly health careexpenditures. Medicare and Medicaidexpenditures are even more concentratedon a small proportion of the usersprimarily those receiving hospital or

nursing home care.

PROPORTION OF ELDERLY LIVING IN THE (XJVINIt N ITTAND LEVEL OF HEALTH EX PENDITVREN

..1.4

11/1110.011.0 CamwenerAN Tsar

inee***.asart, &NImilletOM IMP

'F.xpPradi tute; bit thr 111.../14 al Oar.. .2

I': 141.y 1`,.ple It. t he. e. masa t71a...p.,7ftleut ri " 14.4e 4,40.i: Mai;. al!'t 2. 4 xtt .1071 anti t urt .Sur vv9i,ara irilsrt N... 1, , Nt,, fi4-24.04.4

V.A P.'. fr,,P, latn.i i 14 IT

41

WHY IS THIS A DIFFICULT ISSUE?

MEDICARE AND MEDICAID HAVE HAD POSITIVE RESULTS

Prior to the inception of Medicareand Medicaid, many of the elderly couldnot afford adequate medical care. One-third of the elderly had no healthinsurance prior to 1965. The elderlywere spending nearly 15 percent of theirincome on health care.

Between 1955 and 1967, death ratesfor U.S. elderly were falling at a lowerrate than in the developed Europeancountries. For the decade after theintroduction of Medicare and Medicaid,death rates for the elderly in the U.S.fell at a faster rate than in the Europeancountries.

Some analysts argue that thevarious age groups of the elderlypopulation are healthier than theircounterparts were in earlier decades.However, chronic disease and disabilitystatistics demonstrate that the numbersand proportions of frail elderly areincreasing. The comparative healthstatus of yesterday's, today's, andtomorrow's elderly is a topic of currentdebate.

The gap in use of health careservices between the poor and non-poorelderly has been substantially narrowed.It should be noted that even equal usewould not necessarily result in adequatecare since the poor elderly tend to be inpoorer health than the overall elderlypopulation and need more health care.

ACCESS TO HEALTH CARE: 1980

pf.or FlAorIv

N,Inpoor Eldorly

Number of

PhysicianVisits

ProportionHospitalized

Durinz_ the Year

5.0 16%

5.4 I9Z

TotalCosts

No

significantdifference

Sour;:p: "Current Estimates from the Health Interview

Survey: US 1980," Vital and Health Statistics,

Series 10, National Center for Health Statistics

(Washington, D.C.: USGPO, 1980).

42

31

WHY NI THIS A DIFFICULT MUM

HEALTH CARE COSTS ARE INCREASING FOR ALL AGE GROUPS

It will be difficult to bringMedicare and Medicaid costs undercontrol because these programs aresubject to the same general factors thatare making health care costs rise for allgroups in the population: inflation, anincrease in services per beneficiary, useof costly new medical technology, andlack of incentives to control costs.Contrary to popular perception, the leastimportant factor in cost increasesbetween now and 1995 will be theincrease in the elderly population.

INFLATION ACCOUNTS FOR MORETHAN HALF OF COST INCREASES.

Inflation is the single mostimportant contributor to the growth ofhealth care costs in the last decade.Between 1972 and 1982, an estimated 58percent of the increase in health carecosts was attributable to generalinflation.

If general inflation continues at itscurrent lower rate, the rate of increasein health care costs should also slow.However, medical care price inflationhas also been a major contributor andwill have to be dealt with separate'''. In1983, medical care price inflation rosetwice as fast as general inflation.

SERVICE INTENSITY ACCOUNTS FORA QUARTER OF MEDICAREIN CREASES

The rise in volume of services perbeneficiary is the second most importantcause of increases in Medicare costs.The Office of Technology Assessment(OTA) estimates that 24 percent of the93 percent increase in per capita hospitalcosts between 1977 and 1982 can be

attributed to an increase in the use ofcovered services.

On the average, Medicare-coveredhospital patients are given more hospitalservices, medical and surgical services,drugs, and medical devices than thegeneral hospital population. Though theelderly generally need more care, aportion of the high use of hospitalservices may result from a lack ofincentives to use less expensiveambulatory care and from the desire ofproviders to maintain high hospitaloccupancy.

NEW TECHNOLOGY

Medical technology is a majorfactor in increasing health care costs.Medicare's policies are a key factor inthe adoption and use of thesetechnologies. The cost attributable totechnology changes is difficult toestimate since it is closely tied tochanges in intensity of care. In addition,new technology can be judgedappropriate or inappropriate only interms of whether or not it improves thequality of care. However, there is anintense debate over whether or not anassessment of new technology mustconsider its impact both on health statusand on cot.

LACK OF INCENTIVES TO CONTROLCOST

Third-Party Financing

Most third-party financing ofhealth care is said to insulate the patientfrom considering the cost when makingdecisions about services and to insulatethe physician from concern about thepatient's ability to pay for services. This

43

32

"distance" from the costs can lead to anincrease in the numbers of proceduresand tests performed and, particularly, toan increase in high-cost procedures.

Medicare already requires that theelderly pay a significant proportion ofthe costs of their care. In addition toserious questions about the ability of theelderly to pay more, recent studiesindicate that additional Medicare costsharing would not be likely to slow costgrowth.

Medicare's new prospectivepayment system attempts to controlcosts without increasing cost-sharing bythe elderly. Through the fixed-7'reimbursement-per-admission(Diagnostic Related Grouping DRG)schedule, Medicare is seeking to reversethe incentives provided by the previousMedicare paymzot plan. Earlier,providers were reimbursed for eachservice for each patient, regardless oftotal cost.

Reimbursement For Pro: RatherThan Results

Physicians are reimbursed forprocedures performed, tests completed,physician visits, etc., rather than forbeneficial outcomes. Hospitals arecurrently reimbursed on the basis of anadmission for a particular diagnosis.Very little is known about the relativerisks and benefits associated with manystandard procedures (medical andsurgical) used by physicians andhospitals, and what little is known is notwell disseminated.

By tradition, physicians have a

great deal of discretion in the treatmentof their patients. For example, theindividual physician usually determineswhether or not a patient will behospitalized. There are large differencesamong regions of the U.S. in the use ofhospitals by Medicare patients. Forexample, North Dakota has a hospitaldischarge nearly twice that found inMaryland. In addition, several studieshave shown that the kinds and costs ofhoOital treatment in a community aremore related to the numbers ofphysicians and their specialties than tothe health of the population.

Thus, many analysts believe thatthe supply of physicians and specialistswhich is expected to grow over the nextdecade and their methods ofprescribing treatments will have a greatdeal to do with the general increase inhealth care costs in this country.

GROWTH OF ELDERLY POPULATIONWILL BE LESS IMPORTANT UNTIL 2010

The number of elderly peopleeligible for Medicare and Medicaidjumped during the last 20 years. Thosenew recipients have also been a factor inincreasing ants. However, between nowand 2010, new recipients will increaseonly gradually. The CongressionalBudget Office has estimated that only asmall percentage of the projected annual13.2 percent growth in hospitalreimbursements between 1984 and 1995will be de to an increase in the elderlypopulation. After 2010, when thenumber of elderly begins to rise sharply,health care costs can be expected to riseaccordingly.

44

33

VETERANS HEALTH CARE A SPECIAL CASE

SURGE OF ELDERLY VETERANS WILL STRAIN THE VAHEALTH CARE SYSTEM

Veterans of World War II andthe Korean War will be turning 65and becoming eligible for VA-provided or supported health carebetween now and 2000. The numberof veterans 65 and older will morethan double in the next 15 years(from 4 to 9 million) and the number85 and older will grow from about260,000 to about 515,000.

Since VA hospitals and nursinghomes already have en 85 percent

occupancy rate and many nursinghomes have waiting lists, the VAhealth care system will be hardpressed to meet the projecteddemand without major changes.

Options for dealing withprojected demands for service arehighly controversial. However, theboom in ttm veteran population willrequire solutions to be formulatedand enacted in the near term.

be

Minions

4

VETERANS Ann SS+ AND 85+1111110-11111183

ROE 65+

semROE 05+

2 ^'

-0

err myna1900

2

'77ofrtre,

"0'51

fdrt Imam1990

7

2000

vanes

r>

2010

-V.1t;rwnerAARratiun:rarimigr Ow older vetaln,Naehington,P.c.: VA, .7747., IPF4), iniTTAINTOWAIW*41CniaThe projce?ionshaw..? tvc Ceneue datn fur mctcran poruLation a arid OW/r.

45

34

SUMMARY

In the last 20 years, the U.S. haschanged from a country in which mostelderly citizens paid for their own healthcare services or did without (and manydid without) to a country in which mostelderly citizens have better access toand significant government support forhealth care. At the same time, the U.S.has experienced an unprecedentedincrease in health care costs across theboard.

Throughout the 1990s, the elderlywill likely continue to pay ever largerproportions of their income for healthcare. Of equal concern is the fact thatthe Medicare Trust Fund will run out ofmoney by 1990 unless steps are taken toincrease income or reduce outlays, orboth. Added to these trends arepredictions of continued escalation ofgeneral health care costs and the comingboom in the elderly population in thenext century.

UNANSWERED QUESTIONS

1. Can we deal with the health carecosts of the elderly separately from thegeneral health care costs of thecountry? Should we?

2. What shifts will occur in types ofhealth services needed by tomorrow'selderly?

3. What are the most appropriate rolesfor the public and private sectors infinancing, delivering, and regulatinghealth care?

4. To what extent can the medicalprofession regulate itself to produceneeded quality standards and guidelines,and to what extent should thegovernment be involved in setting thosestandards and guidelines?

5. Can rationing of necessary healthcare be avoided? What methods shouldbe used to insure that unnecessaryprocedures are not done?

6. What can we do to place more

emphasis on maintaining good health andpreventing disability and illness, as wellas treating illness when it develops?

7. How should health care researchrelated to tim elderly be balanced withregard to improving life expectancy andimproving quality of health life for theelderly?

8. Should the U.S. have some form ofnational, health insurance?

9. To what extent should the federalgovernment insure against catastrophicillness for the elderly? For thepopulation in general?

10. To what extent will alternativehealth care systems such as HealthMaintenance Organizations (HMOs)reduce the rate of growth in health carecosts for the elderly?

11. Can we learn from the experiencesof other countries in this area?

35

OPTIONS

The option statements presented onthe next few pages are intended tostimulate thought and discussion. Theyare not comprehensive, nor are theyendorsed by the CongressionalClearinghouse on the Future, the HouseSelect Committee on Aging, or any other

organization or individual involved in thcpreparation of this report. Their solepurpose is to introduce the reader to thevariety and scope of options that havebeen raised in this area, so understandingand useful debate will be enhanced.

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

3j; EA A LL ATI S N F HEALTH CARE RESOURCES

OBJE prove

ILLUSTRATIVE OPTION 1

so veney

ILLUSTRATIVE OPTION' 1 ILLUSTRATIVE OPTION 3

Limit payments to Medicareproviders (doctors, hospitals)while maintaining quality.

Increase Medicare revenues byincreasing payroll taxes orsupport from general revenueor excise taxes.

Increase use of HealthMaintenance Organizations (HMOs)by the elderly.

PROS PROS PROS

1. Care-givers might be morelikely to prescribe onlyessential services.2. If fixed payment levelswere set appropriately,providers would have anincentive to perform servicesmore efficiently.

1. Could help make systemsolvent without undue burdenon the elderly.

CONS cora

1. Could reduce payments madeby both the elderly, and theMedicare and Medicaid programs.2. Allows government to insurebetter quality assurance by providers.3. Allows providers to havestronger role in allocating resourcesamong health services.

CONS

1. Market may be better thangovernment at setting paymentlevels:

- if payments too high,further waste would result

- if payments too low,providers could refuse toserve Medicare patients.

2. Quality of care may stillbe compromised.

1. Could be a dreg on employ-ment of new workers.2. Could reduce emphasis oncost constraints.3. Not a solution to theproblem of increasing costs.

I. Elderly unfamiliar with HMOsand how they operate.2. Might require some short-termfederal investment if HMOs wereto reach large numbers of elderly.

CAUTKMis The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

SUB AREA: ALLOCATION OF HEALTH CARE RESOURCES

OBJECTIVE: Increase quality ollife fortomorrow's elderly.

ILLUSTRATIVE OPTION 1

Increase emphasis onpreventive health care for allAmericans (e.g. exercise,nutrition, stress reduction).

PROS

ILLUSTRATIVE 013110N 2

OBJECTIVE: improve health servicesto the elderly and improve equityof access.

Support research iiifo the risksand benefits of specificmedical and surgicalinterventions for the elderly.

ILLUSTRATIVE OPTIOlff

Contain ouf-of-pocket healthcare costs to the elderly.

PROS PROS

1. Tomorrow's elderly possiblycould have fewer healthproblems.2. Long-term costs could bereduced if health problemsdecreased in consequence.

1. Would provide better basisfor decision-making by theelderly, physicians and policy-makers.2. Could provide more cost-effective basis for practiceof medicine to the elderly.

1. Could relieve pressure onexpenditures for othernecessities, e.g., food, shelter.2. Could give elderly opportunityto substitute ambulatory care formore expensive hospital care.

CONS CONS CONS

1. Could increase costs inshort term.2. Additional research wouldbe needed as to effectivenessof preventive measuresagainst chronic diseases.

1. Would increase short-termcosts.

1. Would increase Medicare costsunless system-wide costcontainment occurred.

49

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the Congressional Clearinghouse on the

Futurig they are presented for information and discussion only.

ISSUE AREA: ALLOCATION OF HEALTH CARE RESOURCES

OBJECTIVE: Improve health services to the elderly and improve equity otaccess.

ILLUSTRATIVE OPTION 2 ILLUSTRATIVE OPTION 3 ILLUSTRATIVE OPTION 4

Authorize Public HealthService (PHS) fellowships ingeriatrics and relatedspecialties.

Provide incentives for homedelivery of health services(e.g., shots) to elderly.

PROS -P11013

Provide incentives to privatesector Public HealthService improve healthservices in geognwhical areasnow underserved.

1. Could increaseattention to cdseases of theelderly by tomorrow'sphysicians and researchers.2. Would elicit more researchon topics related to elderly.

1. Could be more cost-effective.2. Would enhance coverage.3. Would be more convenient forthose with restricted mobility.

1. Would enhance coverage.2. Would improve accessfor those with restrictedmobility.3. Could improve access to poorand near poor in these areas.

CONS CONS CON

1. Could cost more.L Some experts favor oppositeapproach, i.e. integratinggeriatrics into generalmedicine..3. PHIS fellowship beingquestioned as effectiveincentive to specialization.

1. Could be hard to administer. L Could cost more.2. Could be diffiegt tomaintain any services beyondbasic health services sincesufficient professional staffingmight not be available to meetall the needs.

50

LONG-TERM CARE

The discussion of long-term cavefor the elderly is commonly presented aspart of health care issues. It is treatedseparately here because it may be moreaccurate to think of long-term care ashelping people live their lives rather thanas extended medeal care. It is alsoincluded as an example of an area inwhich Medicare and Neclicaidreimbursement has built-in biases towardmedical treatment andinstitutionalization, and away fromfamily and other home care.

Moat people experience somedisability (temporary or permanent)during their lives. This universality ofexperience may help us to understand thelong-term needs of the elderly who aremore likely than the general populationto have such disabilities. Veryfrequently, these disabilities result inmajor requirements not for medical care,but rather for assistance with everydayliving.

t39)

51

4V,

40

WHAT ARE THE FACTS?

LONG-TERM CARE REQUIREMENTS ARE NOT NECESSARILY MEDICAL

"Long-term care" includes all theservices that are needed on a continuingbasis to enable a person with a chronicdisability to have full physical, social,and psychological functioning.

The existence of such needs doesnot necessarily imply the presence of achronic disease. Any limitation inphysical and/or mental capacity canprevent a person from accomplishing thetasks of daily living without assistance.

Estimates of the numbers of non-institutionalized elderly who havefunctional disabilities vary from about 18percent to 43 percent. While most ofthese elderly require only limited andunskilled help, this group includes overtwo million bedfast or houseboundpersons who are as functionally impairedas those in institutions.

SEL.ECTED FUNOMNAL MAMMIES OF

terraNON-IRENITUTIONALIZED ELDERLY

DAtt

tit.t. vet P &.f Vie tali/ Ornosts "Aims An Tram I 1.0 tA+, A411,14 ...4100/.. c`ar rem t f t2.rt ion _ftws t

r P-21. /to. 218 11.411i ritt on P. r. ustituYF t/

WHAT ARE THE FACTS?

MOST LONG-TERM CARE IS GIVEN AT HOME BY THE FAMILY

In 1980, almost 11 million elderlyhad some degree of limitation of dailyactivity due to chronic conditions; lessthan one in ten of them was in aninstitution.

The number with such limitations isexpected to rise to over 16 million by theyear 2000, and exceed 23 minion by 2020

more than double the current level.

The vast majority of long-termcare of these non-institutionalizedelderly is provided by family andfriends. Seventy-three percent of

t

elderly home care is provided solely byrelatives and another 16 percent useformal sources to supplement familycare. As would be expected, those livingalone or with non - relatives make greateruse of formal care services than do thosewho live with relatives.

As demands for care increase inintensity or complexity, family caretends to be supplemented by outside helpwhieh must be paid for but is still notnecessarily medical in nature (forexample, transportation, food services,and personal companions).

52

41

The primary factor leading toinstitutionalisation of an older person isnot health status. Institutionalisationresults from absence of family,exhaustion of personal or familyresources, or the over-accumulation ofburden on existing family members.

LIMITATION IN ACTIVITY WE TO CHRONIC CONDITIMISACTUAL AND PROJECTED

15-

5

75 +

55-74

1980 1990 2000 2010 2020 2030 2040 2050 2050

YEAR

Sourcv: Based on 1980 Health interview Surveys NationalCenter for Health Statistics; and US Bureau ofthe Census, "Projections of the US: 1982-2050,"Current Population Reports, Series P-25, No. 922(Washington, D.C.: USGPO, 1982)

53

42

WHAT ARE TRH FACTS?

DEMAND FOR NURSING HOME CARE IS RISING FASTER THAN SUPPLY

Even though only about 5 percentof the elderly live in nursing homes atany given time, the rate of use of nursinghomes by the elderly has almost doubledsince the introduction of Medicare andMedicaid.

Roughly 20 percent of the very oldare institutionalized. Most of these arewomen. The number of people needinginstitutional nursing care is growing:

o At the beginning of this century,the most prevalent health problemsof the elderly were acute. Today,the most prevalent health problemsare chronic, and the likelihood ofhaving a chronic illness or adisabling condition increasesdramatically with age.

o Women predominate in the 85+population the population inhighest need of long- -term care.

o The diseases which affect elderlymen tend to kill. The diseaseswhich affect elderly women tend tocause chronic illnesses andconditions requiring assistance.

o Elderly women are much morelikely to be widowed and to livealone than elderly men, and thus toneed outside help for disabilities.

Nursing homes are mostly "forprofit", and generally full. It seemslikely that there will be a growingproblem of meeting the demand fornursing home care, particularly for thosewith the greatest need the very old,blacks, and the very poor.

WHY Hi THIS ISSUE DIFFICULT?

GOVERNMENT LONG-TERM CARE SUPPORTIS BIASED TOWARDS INSTITUTIONALIZATION

The issue of who pays for long-termcare is highly dependent on whether thecare is at home or in an institution.Public financial support for long-termcare is scarce outside nursing homes.Home care, especially that provided byhomemakers rather than by nursingpersonnel, is rarely covered except indemonstration projects. Day careservices for the elderly are similarly notcovered by public funds.

Whit:: most funding for long-termcare comes from the elderly and theirfamilies, son 1, public support comesfrom Medicaid and a minimalcontribution is made by Medicare.

Despite some recent efforts tocounteract the bias, both Medicare andMedicaid pay more toward institutionalcosts than home care costs. Since theelderly's out-of-pocket costs forpurchased home care services aregenerally much higher than for the sameservices performed in a nursing home orhospital, there is a financial incentive toplace the person in an institution. As aresult, many elderly people in nursinghomes are receiving a higher level ofcare n their condition requiresbetween 1O and 45 percent depending onthe type of nursing fneility.

Since 1974, government and privatepayments for nursing home care !wifegrown dramatically and are expected tocontinue to escalate for the foreseeablefuture. Private spending, in the form ofhealth insurance, and personal and familyresources, accounts for about half of thetotal costs of nursing care.

While it is generally agreed thatthe cost of nursing home care isbecoming too large, there is alsoagreement that government resourcesneed to be reallocated to non-institutional long-term care which maybe less costly and frequently moreappropriate than institutionalization.

NATIONAL NURSING HALEEXPENDITURES

00

40

10

1990 1900 1070 11170 19110 111011 1910

YEAR

55

'

44

WHY H3 Tins ISSUE DIFFICULT?

THE FAMILY MAY NOT BE ABLE TO PROVIDEAS MUCH CARE IN THE FUTURE

At present, the family is' theprimary provider of long-term care forthe non-institutionalized elderly. Yet,demographic and social trends indicatethat the family's ability to provide thissupport will be strained:

o An increasing number of elderlylive alone rather than in a familysetting (more than 30 percent in1980). Most of those living aloneare women.

o The 85+ population is the fastestgrowing age group in the UnitedStates. This group is much morelikely than the rest of thepopulation to need assistance indaily living.

o As life expectancy increases, thetrend will be for the very old tohave children who are themselveselderly. These elderly children are

not as likely to have the financialresources and physical stamina tocare for older relatives.

o Younger adult children who are stillin the work force may increasinglyfind that they have more than onegeneration of elderly relatives tosupport and assist.

o Family size has decreased markedlyover the last 30 years, so there areand will continue to be fewerchildren to provide assistance forelderly parents.

o Last, and perhaps mostimportantly, women, the traditionalcare-givers, are increasingly in thework force rather than at home.Today and in the future, women areless likely to be available as full-

- time, dependent-care providers forthe elderly.

A SMALLER PROPORTION OF WOMEN FILLTHE TRADITIONAL FUU..TIME HOUSEKEEPING ROLk

7 .1. B.:,AUsvo..1, "r he, 71g!

A Cti.attkr3A, AO lot :n ;11,44 ngt,m, D.C.

Li.:1:,412, Apr:1 19$41.

56

45

SUMMARY

It is very likely that families willincreasingly need and expect public helpin providing long-term care for theelderly:

o The number of elderly in need ofsuch care is increasing.

o More and more elderly women areliving alone.

o The traditional care-givers, adultwomen, are increasingly workingoutside the home and are not aslikely to be available for full-timecare in the future. However,technology and flexibleemployment policies thatencourage more work at home mayact as a counter trend and allowthe family to provide more homecare.

There is great need for moreresearch on how best to pay for andprovide long-term care and to assistdecision-making by families or elderly

individuals in this area. is one exampleof the potential value of such research, arecent study has indicated that theexistence of community-based servicesencourages families to continue long-term care of their elderly relatives,rather than choosing institutionalization.

Not only is it more humane toassist elderly people in remaining activemembers of their families andcommunities as long as possible, but it isessential if we are to make the mosteffective use of the limited andexpensive institutional care facilitiesthat we have.The growth of the over-65and over-85 populations alone will be sogreat as to require the use of all of theexisting nursing home facilities Just forthose who are truly incapacitated andwho have no alternatives.

The elderly living alone are a groupparticularly vulnerable toinstitutionalization sometimes for lackof relatively minor but essentialservices. This group of elderly deservesparticular public policy attention.

UNANSWERED QUESTIONS

I. What is and should be included in long-term care?

2. What is the appropriate mix ofsources for financing long-term care?Will there be resources or a need foradditional government support to meetthe long-term care needs of anincreasingly vulnerable population?

3. What is the appropriate mix ofservices and which should be provided bythe public and private sectorsrespectively?

4. How can existing services be bettercoordinated for greater effectivenessand efficiency? People with long-termcare needs who live in the communityoften require multiple services such ashome health care, tome-delivered meals,assistance with chores, andtransportation. Different services areusually available, if at all, throughseveral different Federal, State, andlocal programs. Each program is likelyto have to be contacted separately andeach is likely to have its own eligibilityrequire men ts.

4f;

5. What policies and programs willenhance the ability and motivation of thefamily to provide long-term care?

6. Under what circumstances is it morecost- effective to provide home careservices to the frail and vulnerableelderly as an alternative toinstitutionalization?

7. What can we learn from Europeanapproaches to long-term care, such asthe provision of sheltered housing(independent dwelling units with somehousekeeping and/or meal services andwith an emergency call-button system)?

8. How can we increase equity of accessto long -term care services on the part ofthe most needy?

9. How can services be located mostconveniently for those who need them?For instance, the elderly, like the U.S.population as a whole, are more heavilyconcentrated in urbanized areas, but theincidence of chronic illness in the elderlyis higher in rural areas where servicesare less available. Also, consolidation ofinstitutional care for veterans,undertaken to reduce costs, has resultedin undue isolation from family andfriends.

OPTIONS

The option statements presented onthe next few pages are intended tostimulate thought and discussion. Theyare not comprehensive, nor are theyendorsed by the CongressionalClearinghouse on the Future, the HouseSelect Committee on Aging, or any other

,58

organization or individual involved in thepreparation of this report. Their solepurpose is to introduce the reader to thevariety aid scope of options that havebeen raised in this area, so understandingand useful debate will be enhanced.

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

ISSUE AREA: LONG-TERM CARE

OBJECTIVE: Expand options Tor functionally disabled elderly.

..+.......1.11....110MI

ILLUSTRATIVE OPTION 1 ILLUSTRATIVE OPTION 2 ILLUSTRATIVE OPTION 3

Revise Medicare regulationsto simplify payment for home-based and community care forelderly.

1. Could encourage and supportfamily care.2. Would enhance personalautonomy and dignity ofelderly.3. Could relieve load onnursing homes.4. Could increase low skill,part time job opportunities.

Increase incentives to familiesto provide/prolong care totheir elderly (greaterdependent deductions, taxcredits, etc.)

1. Could encourage and supportfamily care.2. Would enhance personalautonomy and dignity ofelderly.3. Could relieve load onnursing homes.4. Ctu ld increase low skill,parttime job opportunities.

Subsidize or pay directlyfor community alternativesto nursing homes, such assheltered workshops, day care,halfway houses, senior centers.

1. Could relieve load onnursing homes.2. Could increase stoply ofalternative resources.3. Could support family careby temporarily relieving familymembers of responsibility.4. Could have social benefitsfor the elderly.

CONS CONS CONS

1. Cott id be hard toadminister.2. Cost-effectiveness onlypartly demonstrated.3. if payment for home carereplaces non-paid home carerather than institutionalcare, costs could be veryhigh.

1. Effectiveness of incentivesnot yet established.2. Would reduce tax revenues.3. Would be difficult toestablish appropriate levelsof compensation.4. Would be difficult toestablish and enforceeligibility requirements.

1. Could increase problems ofmonitoring and regulation.2. Overall costs and benefitsuncertain.3. May encourage new users ofthese < 'ices instead ofoften. iternatives to thosewho would otherwise enternu sing homes.

CAUTION: The options shown here are not endorsed by the House Select Committee on Aging or the CongressionalClearinghouse on the Future; they are presented for information and discussion only.

A A

OBJECTIVE: Improve cost-r *ectivenew andquality of long-term care.

OBJECTIVE: Improve basisfor decision- making.

ILLUSTRATIVE OPTION 1

Government monitoring ofnursing homes receivingMedicare monies to insurPthat patients are receivingappropriate levels of care,e.g., by quality assurance,and patient pre-screeningand re- screening.

ILLUSTRATIVE OPTION 2 ILLUSTRATIVE OPTION 1.

Improve linkages between acuteand long-term care componentsof the health care system.

Study and learn from theextensive experience of theVeterans Administration withlong-term care.

PROS R

1. Could snake space availableto those most needing service.2. Could reduce costsklyproviding more appropriatelevels of care.3. Could reduce costs byreducing the number of newfacilities required for thefuture elderly.

1. Could improve properplacement of elderly inhealth facilities.2. Could potentiallyreduce capital invest-ment for new facilities.

1. Considerable experienceavailable over many years.2. Solutions to long-term caremight involve some linkagebetween VA and other long-termcare systems.

CONS CONS CONS

I. Difficult to monitor.2. Would require establishmentof criteria for evaluation/screening.3. Costly to administer.4. Could be unpopular withnursing home owners.

1. Would reinforce medicalmodel of long-term care ratherthan social model.

1. May not be directlyapplicable to the problems ofthe population as a whole,especially women.2. Could reinforce the statusquo rather than emphasizing newapproaches.

41,

EPILOGUE

This policy primer has presented key characteristics of tomorrow's elderly,major forces molding their future, and significant issues facing decision-makers asthey prepare for that future. Some illustrative options were included to give thereader a taste of the kinds of policies advocated by grows who are concernedabout issues related to the elderly and who want to correct problems that they seenow or coming in the future. This information is intended to provide a futurecontext within which Congress can consider today's policies and programs.Specific legislative proposals will require far more detailed exploration andevaluation than can be encompassed in this document.

Nevertheless, some conclusions can be drawn based on the materials offeredhere. It is clear that life for tomorrow's elderly will differ from the experience ofprevious generations. There will be more of them, so their concerns will be ofgreater significance to the nation as a whole. They will be older andpredominantly female, which will change health profiles and needs relative tothose of today's elderly. More of them will live alone, changing the nature oftheir dependence on resources outside of their own households and families. Theywill be better educated, and the women will have experienced more years of paidemployment.

Federal expenditures in support of the elderly have been steadilyincreasing: Because the elderly population is growing and its needs are changing,the question of affordability of programs is frequently raised. It is even moreurgent, and more appropriate, however, to re-examine fundamental concernswhich are often overlooked What will be the needs of America's elderly in thefuture? What conditions twill they face? What is the appropriate role of thegovernment in meeting their needs? What are the most appropriate policies andprograms? How can equity be balanced with efficiency? All these questions canbe posed in all three of the issue areas highlighted in this report: employment andretirement, allocation of health care resources, and long-term care. Thesefactors need to be considered and debated together with the issue of affordabilityand more specific, program-oriented alternatives such as those listed here as"options ".

No answers or recommendations are offered here for Congressionalconsideration. This document attempts only to indicate the magnitude, nature andcomplexity of the salient questions and to provide focus to the Congressionalagenda and debate on the future of America's elderly.

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LEGISLATIVE HISTORY

Since the 1930s, 85 public laws have been passed that establish public policiestoward the elderly. This section presents brief highlights of those years andcharts the legislation.

HIGHLIGHTS OF THE LEGISLATIVE HISTORY

The chart below lists major laws by decade; characterizes major impact or intent(income security, health, housing, employment, or social services) and shows othermajor economic and social trends that were occurring when the legislation passed.

1930-1939: "THE NEW DEAL" PROGRAMS

In the post-Depression period, Congress enacted key legislation for theelaerly, such as the Social Security Act of 1935. Under Franklin Roosevelt's NewDeal, manures were taken to provide for the poor and assure the economicsecurity of all citizens.

1940-1949: DEFENSE EMPHASIS

During World War II and immediately after, emphasis was on the war effortand providing benefits for the returning veterans. Although there was someacknowledgement of the increase in the elderly population, domestic legislationwas put on hold.

1950-1959: POST-WAR DOMESTIC PROGRAM EXPANSION

Following World War II, a broad range of programs was enacted for theconstruction of housing, schools, and highways. The elderly gained indirectly fromthese programs, particularly the housing programs and the programs forrehabilitation of the physically handicapped. The Social Security Act wasexpanded to provide disability benefits.

(SI)

62

52

1960-1969: "THE GREAT SOCIETY" PROGRAMS

During the Lyndon Johnson era, ma* new social programs for people of allages were initiated by Congress. This era marked .the second great wave ofprograms benefiting the elderly: Medicare, Medicaid, anti-poverty progyams, theOlder Americans Act, and others.

1970-1979: PROGRAM CONSOLIDATION AND RESTRUCTURING

During the 1970s, the primary emphasis was on restructuring andconsolidating programs. The Nixon Administration sought to decentralize programadministration, increase the role of the states, control spending, and build-inaccountability. However, SSI, the Federal Government's first nationallyadministered welfare program was established to provide minimum benefits to theneedy aged, blind and disabled, and ERISA enacted in 1974 provided federalstandard, for protecting private pension programs.

1980-1984: DECELERATION AND COST CONTAINMENT.

The Reagan Administration has stressed pr ivate sector initiative, a reducedrole for the federal government, reduction of domestic spending, and increasedmilitary spending. In response to presidential initiatives, Congress has cutvending and tightened the eligibility requirements for a number of federal

s' domestic programs that benefit the elderly.

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