16 The ageing population: in search of a policy

IDENTIFYING THE PROBLEM AND THE VARIABILITY OF STATISTICS


In 2006 the proportion of the population made up of those 65 years and over was just over 13%. Notwithstanding flood, fire, famine, the uncontrolled spread of disease and the instability of world politics, this proportion is predicted to rise to 25% by 2050. Of our much older population, those 85 years and over, in 2006 there were 290,000 but by 2050 it is expected that these numbers might well rise to approximately 1.6 million. Overall, one in four (25%) Australians will be over 65 by 2044 (ABS 1998, Central Intelligence Agency [CIA] 2006a).


In addition, the median age of the population will rise by 10 years from 35 in 2001 to 45 in 2051 and during this time participation in the labour force is predicted to fall by 10 percentage points (Access Economics 2004). However, this fall might be offset by a continuation of current trends. These include rising female workforce participation, an increasing number of young people in work as a greater demand for workers leaves fewer in unemployment, and the possibility that males of retirement age might be persuaded to continue to participate beyond 65 years. It is estimated that if an extra 500,000 people aged 65–70 years continued working more than 15 hours per week, their earnings would total $35 billion in 2018 saving the government $4 billion in pensions (Walker 2005) and providing additional gains through taxation. One factor that could provide a counter to these changes in demographic profile, is Australia’s fertility rate, which is predicted to increase slightly from 1.76 in 2006 to 1.8 in 2016 and then to fall to somewhere between 1.3 and 1.7 by 2050. This rate might well be affected by financial inducements to produce more babies, the greater availability of affordable childcare services, or a shift away from traditional family values.


There is division among writers and researchers as to what impact the ageing of the population will have on Australia by the mid 21st century and whether we will be facing a crisis (burden) or a transition to a different but manageable era (benefits).


POLICY RESPONSES


The ‘crisis’ argument and the ‘burden’ of the ageing population


The core of this position is that the ageing population will create difficult to meet economic and social costs and the larger numbers of the aged must therefore inevitably cause the healthcare bill in 2046 to rise to an overall predicted difference between government spending and revenue of 5% (Department of the Treasury 2002) or beyond (Productivity Commission 2005). More recently, a lower prediction of 2.7% (Department of the Treasury 2007) has emerged (based on improvements in the economy and a slowing in pharmaceutical costs).


Those favouring the ‘burden’ argument seek resolution in one of two ways: expansion of private sector health delivery and increasing taxation and reform.


The expansion of private sector health delivery


The assumption is that relentless and inevitable growth will lead to an unsustainable public system and that current standards will only be maintained if limits are put on public system spending in concert with encouragement for the private system to expand. However, increasing costs are not directly connected to the growing numbers of older citizens but are the result of the rising costs of medical technology and pharmacology. Between 1983 and 1995 Australia’s expenditure on health grew by 2.8% but only 0.6% was due to ageing (Kinnear 2001). In addition, the emphasis on ‘burden’ in this context has been seen as a deliberate political manoeuvre to facilitate growth in the ‘for-profit’ private sector and to justify containment of expenditure in the public sector (Collyer & White 2001, Coorey 2004). Kinnear (2001) has suggested that the outcomes of a larger shift to the private sector might well be problematic as indications are that current private sector involvement has already promoted inequality by creating a two-tiered system and a dual standard of care.


Increasing taxation and reform


According to the ‘burden’ argument, taxation levels will need to rise 21% by 2044 in order to prevent the debt of the burden of ageing becoming twice as large as the GDP (Thomson 2005). With a shrinking workforce, per capita GDP growth will lower to 1.25% in 2020, that is half the current rate. Coordinated reforms in fiscal policy as well as in health and aged care are therefore seen as essential.


The ‘benefits’ argument


A counter response to the burden argument favours the notion that the advent of the ageing population is not a crisis, and given the lengthy lead-up time, it would be remiss of the government not to attempt some form of ongoing adjustment to minimise effects as they arise, rather than sitting helplessly on the sidelines for 50 years (Banks 2004).


In pursuing the benefits argument and insisting that there is no real problem (apart from media over-exaggeration), many authors (Banks 2004, Coorey 2004, Duckett 2002, Healey 2004, Productivity Commission 2005, Richardson & Robertson 1999, Richardson 2004) have tended to focus on three broad areas. These are the uncertainty of current predictions, the lack of burden reflected in outcomes, and the potential benefits of such change.


We don’t know anything for certain


Most current demographic predictions come from epidemiological sources which are incomplete and unreliable (Robertson 2004–05). Equally, conclusions from economic modelling and the analysis of time series and cross-sectional data are problematic as age cost variables will depend on the incidence and management of future technologies – the impact of which are currently impossible to predict. In addition, the precise levels of workforce participation beyond retirement and fertility rates are currently unforeseeable.


Indications are negative


Population ageing is consistent with falling, not rising, national health expenditures, and there is no nexus between increasing age and health expenditure. It is true that one quarter of current health costs is attributable to the last year before death but it is those who die young, rather than the elderly, who are the most costly. In addition, the health of our older population is improving: currently 93% live in private homes and 7% in residential care, and this latter percentage is likely to decrease.


Australia will be a much richer country toward mid-century than it is today and should have little difficulty coping with the predicted increased costs of ageing which might double from 0.7 to 1.8% as a share of the GDP. This increase, however, will be smaller than the predicted growth in new health technology. Thus, any rise in health expenditure should be easily counteracted by 3–5 years of economic growth together with improvements in cost-effective health delivery; for example, better service coordination, the breakdown of interdisciplinary barriers in the health workforce, more effective health promotion campaigns, and the monitoring of new technologies.


We can manage it easily: older people are an asset


The over 55s currently have 25% of all disposable income and this will increase significantly over the next decades. Indications are they will spend it on recreation and leisure as well as on families, thus feeding further into the economy (Olsberg & Winter 2005). In 2030 the largest intergenerational transfer of wealth will occur as older Australians pass on asset holdings of $70 billion – a huge increase from the $8.8 billion transferred in 2000 (Department of the Premier and the Cabinet Queensland 2004). Not only will they provide a significant source of revenue, but also older communities will tend to be less lawless and therefore less expensive to protect; a drop of 16% in the incidence of crime is predicted over the next 50 years by the Australian Institute of Criminology (Healy 2004).


Most importantly, older people hold communities together – providing the necessary ‘glue’ through their social and financial contributions to family, friends and community. They enhance support and network systems as well as participating in clubs and societies (Access Economics 2001, Healy 2004). They also make up the majority of volunteers whose numbers will increase. These people were worth $41 billion dollars to the economy in 1997 (Ironmonger 2000) worth somewhere from between 2 and 7% of the GDP (Productivity Commission 2005 & Ranzijn et al. 2002). As carers, to families and friends with disabilities, they also provide unpaid assistance to the value of $29 billion annually (Australian Institute of Health and Welfare [AIHW] 2003).


FUTURE DIRECTIONS


Strategies under consideration for implementation tend to be underpinned by the guidelines provided by the National Strategy for an Ageing Australia (Commonwealth of Australia 2001) which emphasise the Liberal government’s principles of a user-pays system with a focus on cost containment, individual responsibility, and privatisation. These guidelines fall into three major orientations:



Current approaches to meeting these guidelines include fiscal, migration and employment strategies.


Fiscal


There are a number of fiscal strategies available to policy developers. Encouraging increased private and national savings through superannuation contributions is an important option. The introduction of government funded co-payments for voluntary contributions to superannuation, and the abolition of the 15% contributions tax, enhances the move toward self-funded retirement and away from dependence on the aged pension. In terms of pension outlays as a proportion of the GDP and due to the policy changes which have already been implemented, growth is predicted to be small, from 1.6% to 4.6% by 2050 – one of the lowest rises of all OECD countries.


Compulsory savings through an aged care social insurance scheme have been suggested in the form of Personal Future Funds (PFF) (Saunders 2005). The PFF would cover six months of unemployment for each individual; allow voluntary Medicare dropouts – with the additional tax savings going into their PFF; and tax-free savings and tax-free super. This would enable individuals to have much greater control and decision-making power in the management of their own life costs.


Increasing the age of pension access is another option, as is the provision of extended high level care at home (under the Extended Aged Care at Home [EACH] program) to minimise the costs of expensive institutional care (AIHW 2005).


Migration


Increasing the level of skilled migration from countries with younger populations, such as Papua New Guinea, India, Malaysia and Indonesia, could address the shortage of workers. This might help with worker shortages but there has been limited modelling of the associated factors of education, social and health expenditure costs, which would be the result of increasing the numbers of migrants. Withers (2002) has suggested there might be more value in increasing migration than previously thought, but the Productivity Commission report (2005) argues that huge increases in migration numbers would be needed to make a small impact and the other associated costs would create large fiscal gaps, so migration is not perceived to be the answer.


Employment


This is the arena where most effort is likely to be put. The myth that matureage workers are slower and less productive than younger workers has been countered by research which indicates there is little decline (Lattimore 2005). In some cases productivity actually rises with age. Already workforce participation of workers aged 55–59 has increased from 54% to 64% over the past 20 years while participation rates of those 60–64 have gone from 28% to 39% (Department of Premier and Cabinet Queensland 2004). Some national companies have already moved to include mature age workers; for example, in Bunnings Warehouse 40% of its 20,000 workers are over 50. These part-time employees were previously carpenters, plumbers and other tradespeople. For individuals, the benefits of continuing to work include better income in retirement, less dependency on the public system, and an increased contribution to the system through taxes. There also appears to be a possible link between the age of retirement and life expectancy – those leaving the workforce at 55 double their risk of death before 65 compared with those who work beyond 60 (Tsai et al. 2005).


But keeping retirees in the workforce might not be so easy; a Manpower survey in Britain indicated that although 52% of employers want to employ staff beyond 65, 81% of staff did not want to continue working into their late 60s. Seventy per cent of employers said they would offer flexi-working hours but only 63% of employees said they would take this up (Fuller 2006). The reasons why people might not want to continue working include: discrimination toward age; already having sufficient wealth; the inertia of working beyond retirement age; health factors; super arrangements; or the conflict of wage versus leisure (Bacon 2000).


In summary, policy changes are essential (Productivity Commission 2005). Sound retirement income management does need facilitating in order to prevent people becoming a burden on the rest of the population. The lower costs of children and lesser welfare payments for youth as a result of lower fertility levels will partially help to balance the increases in the numbers of aged but policy aimed at increasing workforce participation will be more cost effective than increasing migration and fertility rates. The drop in fertility and the decline in mortality rates together with an increase in life expectancy will undoubtedly allow longer participation in the workforce but participation by both males and females needs to be enhanced by age discrimination legislation and a mature aged workforce policy.


Although Australia is concerned regarding planning for the future, for some countries, including Sweden and Japan, the future is already well on the way. So how are these countries managing this?


Case study 1 Sweden: decentralised public sector health with some controlled privatisation


In 2006, the proportion of the Swedish population of those over 65 years had risen to 17.6% (CIA 2006c) yet expenditure on health in 2003 was 9.3% of the GDP – the same as the 9.3% of the GDP spent in Australia when only 13% of the population was 65+. The fertility rate in Sweden in 2006 was 1.6 (Carlsson 2004) – already below the worst case scenario predicted for Australia in 2050. How has Sweden succeeded in preventing costs from increasing astronomically?


The principles underpinning the Swedish healthcare system are a commitment to ‘jamlikhet’ and ‘trygghet’. Jamlikhet represents equality in the form of a universal publicly funded high-quality healthcare. Trygghet stands for economic security in health, and translates to choice and democratic access to a mix of curative and preventative medicine. These principles have formed the cornerstone of Swedish healthcare reform and dominate over managerial terms such as ‘cost containment’, although this is starting to be heard.


Following these principles, Sweden’s healthcare is 90% publicly funded. It is a single-payer system, the government both collects money and reimburses health providers, with 9% run by private companies, reimbursed by the government and 1% financed and delivered privately (Lofgren 2002). Sweden has a three-level structure.


On the first level, the national government controls legislation, policy and the national health insurance system, which is funded through income tax (66%), payroll taxes (>25%), government grants (>11%), and user fees (2%). Private health insurance is minimal at around 1% and is usually employer funded (Rae 2005).


On the second level, 21 county councils look after primary healthcare. Preventative care is an important focus and 60% of primary healthcare services are contracted out to private companies. Public doctors have been largely salaried and private doctors have been ‘fee-for-service’, but currently a capitation and fee-for-service model, 50:50, is being trialled by one council. Any private general practitioners (GPs) and specialists are reimbursed at a standard fee and cost patients an extra but defined fee. County councils own the hospitals, all of which are public with the status of public firms, apart from one in Stockholm which was a once-off experiment in privatisation, albeit with large public holdings. Hospitals are funded on the basis of diagnosis-related groupings (DRGs) using the one privatised hospital as the benchmark. Some councils have turned their hospitals into specialist providers to provide more efficient management. Patients can choose to attend primary care centres, which are well developed and multi-disciplinary, or hospitals, or private practitioners, or specialists, without referrals but there are financial incentives favouring preventative care centres and the public system.


The third level involves municipalities or local government which is in charge of nursing homes and the care of the elderly.


Health reforms


In the 1990s as the ageing population started to have an impact, the Swedish healthcare system underwent a series of radical reforms. The Adel Reform in 1992 emphasised integrity, safety and choice for the elderly and sought to decentralise their long-term care to the municipalities, which set about delivering home or other facility care, rather than hospital care. Twenty per cent of these services have become private. The Patient Choice and Care Guarantee reform of 1992 succeeded in reducing waiting times and the current formula is 0-7-90-90. That is, immediate contact, GP within 7 days, 3 months for a specialist appointment, and no more than another 3 months beyond diagnosis for treatment. The Mental Health Care Reform in 1995 provided a focus on deinstitutionalisation, and the Pharmaceutical Reforms of 1997 and 2002 limited subsidised pharmaceuticals and shifted costs to the patients (an increase from 21% to 27%). Patients also pay the full cost of pharmaceuticals in any year up to about $AUD150 (Rae 2005) but nothing beyond this. The balance of pharmaceutical costs is now being devolved from the government to the county councils, which will have to contain costs further as they will have limited amounts to spend.


Throughout these reforms, the number of employees in healthcare services was reduced by 25%. There was a shift in emphasis towards more highly qualified full-time professionals, in particular, speech therapists, psychologists, doctors, physiotherapists, and nurses. Sweden has more doctors and nurses per capita than most other OECD countries. Services have also changed: hospital beds decreased by 45% and bed days by 30% with the result that hospital beds were freed up to be used more intensively; day procedures increased, the numbers of cataract, coronary and hip operations increased, and the cost of pharmaceuticals more than doubled.


The emphasis on preventative care led to the delivery and assessment of a 2-year project undertaken in Northern Sweden during 2000 and 2001. In the project, one-third of the ‘healthy’ pensioners (over 75 years) in one county received home visits to provide extensive assessment, information and training and to introduce measures that could reduce the risk of ill health. The mortality rates were dramatically reduced for this group, and their quality of life improved substantially (Sahlén et al. 2006)


Current problems lie in the variations from county to county and in cost shifting between the counties and the municipalities. Greater consolidation of counties for better management of resources is needed, as is the need for integrated relationships between counties and municipalities. Another issue is that the positioning of individuals by chronological order in the wait queue, means that more urgent cases are held back, so some form of points system is needed. Better costing systems through higher user contributions or more sustainable financing would improve hospital management (Rae 2005). But overall, and without huge changes, privatisation or considerable extra cost, the Swedish system does appear to be managing its increasingly ageing population quite easily.


Case study 2 Japan: multi-payer, government controlled and semi-privatised


Japan has similarities with Sweden with regard to its current demographic profile except that it is further advanced. By 2006 the 65+ comprised 20% of the population (CIA 2006b) and by 2025 this will be up to 27.4%. By 2050 one in three people (33%) will be over 65. The fertility rate is low at 1.3 (2.1 is required to replace the current population) and Japan devotes 8% of the GDP to the health of the aged. Prior to the year 2000, Japanese people had a high savings and employment rate due to a strong economy and consequently the pension has been very generous, being set at 60% of an individual’s previous salary plus bonuses.


The basic principles underpinning delivery of healthcare services in Japan are that the best care should be provided when needed and that individual contributions should be affordable. Following this, the health system is cheap and accessible – there is easy access to all institutions with a small co-payment for services. Only non-profit providers are permitted in the medical and institutional care areas and these providers are expected to provide a high level of technology-based hospital care as well as nursing home care. The government reimburses these facilities but the fee-for-service approach to reimbursement does, however, invite over servicing. For example, the average length of hospital stay in Japan is double that of other developed countries.


The total system operates as a multi-payer system; both the government and private companies collect and reimburse moneys. There are three funds: employee health insurance; the Roken system for the elderly; and the Kokuho program for those retired, self-employed or ‘other’. The Roken system draws from all systems to spread the cost of the elderly. The long-term sustainability of this cross-subsidisation is increasingly unclear as the population ages. There is a cap on monthly co-payments of AUD$697 and the government sets the cost of pharmaceuticals. Fifty three per cent of those over 65 live in co-resident three-generation family groupings, leaving only 4% in nursing homes (compared with 7% in Australia). Only the very poor, the disabled or the homeless live in aged care facilities. The local government takes care of aged care services. In Australia, this contrasts with the Commonwealth government, churches and charities who provide residential care, and the state and local governments who provide community care.


By 2040 the current population of 127million will have dropped to 100million. As worker numbers are already declining, robots are beginning to be used to replace people in such settings as stores, where they guide customers and carry shopping (Burns 2006). They are used in factories, homes, offices and hospitals and in nursing facilities. Robotic suits are used for rehabilitation to enhance mobility and weight-bearing capacity (Reuters 2006). Currently, Japan has 44% of the world’s industrial robots. Consumer goods are also starting to be targeted to the aged to facilitate both independent living and workforce retention.


Management strategies


Management strategies currently being implemented include:



LESSONS FOR AUSTRALIA


So what can Australia learn from two countries which are both well ahead in terms of the impact of their ageing populations? The first and probably most important aspect is that there is no need to panic. Although the transition from one population profile to another will be substantial, it will also be slow. The Australian population will be financially well able to cope with changes by the mid 21st century. It is also clear that having a sound economy provides an essential base and currently all three countries have this.


Although neither Japan nor Sweden have yet reached the full impact of their ageing populations, the measures they have put in place, with a few adjustments over time, should provide a basis for managing the shift in population age. Both countries have started from different positions – on one hand the notion of universal healthcare provided by the Swedish government contrasts with the not-for-profit privatisation of the Japanese system, with its affordable healthcare for all. Australia has a slightly different mix with government controlled, private health insurance for one-third of the population, and not-for-profit and for-profit privatisation of some hospitals. For-profit privatisation has benefited few (apart from multinational companies) in Australia and is predicted to spell the end of notions of universal healthcare (Collyer & White 2001, Grbich 2002). The idea of producing greater efficiencies are tempting in terms of rhetoric but actually putting these in place against the interests of particular groups is not always easy and the question needs to be asked whether these actually result in better health outcomes. The position that health is a ‘good’ rather than a ‘commodity’ to be bought and sold, is important here.


Neither migration nor measures to increase fertility rates are options that have been seriously considered by Sweden and Japan but increased participation within the existing workforce is widely encouraged. In Australia, and following the Swedish example, health reforms targeted at such areas as pharmacological costs and the introduction of new and expensive medical technologies would be useful to prevent these areas from ‘blowing out’. It is worth considering an increased emphasis on primary health and preventative care to help to maintain good-quality health for a longer period of time, thus reducing overall care costs. Australia is already following the New Zealand and Japanese moves to withhold the pension until age 65; this is currently in place for men and will impact on women by 2014. Further options for consideration include a shift to age 67 (as in Norway) or even to 70 (this is being considered by Germany and the United Kingdom). A move to later age access would provide further encouragement for some to stay in the workforce but could disadvantage others.


Australia is taking account of the moves in countries more advanced in the transition to an older population in terms of fiscal management. This appears to be in relation to superannuation and the pension, but adequate policies regarding pharmaceuticals, expensive technologies, age discrimination and continuing participation in the workforce have yet to be developed.


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Mar 21, 2017 | Posted by in MEDICAL ASSISSTANT | Comments Off on 16 The ageing population: in search of a policy

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