The age-old quandary

You are 75. You break a hip in a fall and need surgery. While in hospital, you pick up a post-operative wound infection and develop pneumonia. Your forgetfulness intensifies into more serious dementia symptoms as you struggle to cope with the twin assaults of illness and a strange environment. You are now frail and will need weeks or months of care and rehabilitation; perhaps you will never go home again.

The hospital is not set up for convalescents and wants your bed for more urgent patients. Who will look after you, and how will it be paid for?

It is the kind of question that is central not just to your future but to Australia’s, according to Treasurer Peter Costello. This week he warned cabinet of a $50 billion-a-year budget blow-out in health, aged care and income-support programs within a generation unless the sharply rising costs of a greying population are curbed. A visionary attempt to grapple with the future – or an attempt to soften up the public for cuts to Medicare and social welfare?

“This analysis is scaremongering designed to frighten people into accepting public sector budget cuts when, in reality, they are probably not going to be required,” says Stephen Duckett, professor of health policy at La Trobe University.

But an administrator in a private hospital disagrees about the need for concern about the community’s ability to pay for the needs of older people. “Future horror scenario?” she says. “The system has trouble coping with the elderly now.”

In the next 40 years, the number of Australians aged over 65 will rise from 2.4 million to 6.2 million, with the proportion of older people doubling from 12 to 25 per cent. Towards the middle of next century, after the baby boomers have retired, there might be only 2.5 people of working age for every person over 65, compared to more than five people currently.

According to a report by Access Economics to the Federal Government, the number of workers and the level of income tax revenue is predicted to slow down from now; pension outlays will increase from 2010; health spending will rise from 2020; and aged-care demands will increase from 2030.

The figures sound daunting, and some researchers are warning about the necessity to budget for the needs of the elderly. Other analysts, however, say the outcome is unlikely to be dire, with many comparable countries already coping well with higher levels of older people. “Australia in 20 or 30 years’ time is going to be like France is now,” Duckett says. “We will be older, but we will be roughly the same as several European countries are now. These European countries aren’t bankrupt, so what makes us think that we’re going to be bankrupt?”

The current banner of the doom-and-gloom brigade is a landmark report due to be released by the government with next month’s federal budget. The Inter-generational Report by Treasury’s Retirement Incomes Modelling Unit is the first official government study of the future cost of current policies, and it predicts that advances in medical science that allow people to live longer will place a massive burden on taxpayers, mostly due to expensive new drugs and medical technology. The report is designed to trigger a public debate on the sustainability of existing health and aged-care programs.

News of the report came as the Myer Foundation announced a million-dollar project to develop a vision for aged care in Australia, and as the United Nations ended its world assembly on ageing in Madrid.

Greying is a global issue, says Professor Gary Andrews, of Adelaide’s Centre for Ageing Studies, who attended the assembly. He says developed nations face a significant increase in the very old (those aged 80-90), but ageing is also relevant to the developing world. “Already in a country like China you have more than 100 million people aged 60 and over,” he says.

While the details of the Treasury report are still under wraps, others have previously tried to estimate what ageing will cost Australia. Aged-care spending will more than double in real terms from 1997 to 2031, from $5.8 billion to $14.3 billion, warned a staff research paper by the Productivity Commission in October, 2000. But Australia will probably be richer and more able to afford it; even with relatively conservative estimates of gross domestic product, the report said, “spending grows by only about 25 per cent when expressed as a share of GDP”.

The report, Long-Term Aged Care: Expenditure Trends and Projections, predicted that nursing home beds would need to increase from 78,600 to 158,500 in 2031. But, while the aged’s health costs would rise in real terms each year to 2031, they would fall, relative to GDP, until 2021; by 2031, they will be 2.9 per cent of GDP.

Several health economists claim that the view of the elderly as a drain on health resources is wrong. Duckett has researched whether age is a factor in the cost of hospital stays, examining whether 70-year-olds cost more than 55-year-olds with the same condition. He found no systematic variation. “People think they should worry because older people stay longer, but in reality they often have substantially less investigation and interventions than younger people,” he says.

Andrews agrees: “The fact that more people are in their 70s and 80s and 90s has a relatively small impact on total health costs. A lot of research in the past decade (confirms) less than 5 per cent of the increase in health care costs is accounted for by the population ageing.”
Professor Jeff Richardson, of the Centre for Health Program Evaluation at Monash University, says it is not ageing itself that is the problem: “It’s ageing plus new technology.”

But another question raised by the Treasury report is acknowledged by many analysts as a problem: the ever-rising cost of drugs. John Goss, principal economist with the Australian Institute of Health and Welfare in Sydney, says: “The growth for the Pharmaceutical Benefits Scheme has been 9 per cent per year in real terms. If you have growth of 9 per cent, the doubling period is about eight years. It quadruples in 16 years, and it’s eight times (higher) in 24 years. It has huge momentum.”

An unknown factor in the future equation is the health status of the next generation of oldies. Does living longer just mean more years of disability and degeneration, or will increased life expectancy also mean more years of good health?
Duckett believes the latter. “The reason people are living longer is that they are healthier in old age. An 80-year-old in 20 years’ time will be healthier than an 80-year-old today.”

And it has always been the case that people usually chew up the largest amount of health care in the two years before they die, whether this is at 65 or 85, because that is when their health breaks down. “The general view across demographers and health planners is that the need for health care is not based on years from birth but rather is based on years to death,” Duckett says.

There is another, gloomier possibility. People who live longer because of a reduction in one disease might contract another that disables them; if you avoid the coronary at 70, will you face dementia at 72? The Productivity Commission report says advances such as artificial joint replacements and improved treatments for osteoporosis, arthritis and dementia might lessen disability among the aged. But technology might also increase the survival time of people with disabilities, the report says. “Dialysis for renal failure increases survival time, but the aged person receiving such treatment will still typically be unable to perform many tasks

Then again, disability does not necessarily mean institutionalisation. The Productivity Commission estimates that, while about 18 per cent of those over 65 have a profound or severe disability, only 3 per cent of old people are in residential care.

For some people trying to care for the aged now, the question of whether the future poses problems is nonsensical. There is already a national shortage of nursing home and hostel beds, long delays for elective surgery and cancer treatments, and problems with elderly patients acting as “bedblockers” in acute hospitals (too sick to go home, but with nowhere else to go).

“An acute hospital is not a convalescent home for looking after elderly people when they are not acutely ill,” says Denis Hogg, chief executive of Epworth Hospital. “But where do you refer them to for their on-going care?”

He denies that private hospitals cherry-pick to avoid bedblocking – “In our emergency department, 75 per cent of people admitted are over 75” – and he says Epworth has had to set up its own self-funded aged-care coordination team to try to find places for older people who need care following discharge.

“Step-down” care, between a hospital visit and home, is unfunded by private insurance and often unavailable, says Angela Magarry, director of policy for Catholic Health Australia. Like many other organisations, CHA wants aged care and health to be run by one level of government to prevent buckpassing of responsibilities and gaps in the system. CHA has also called for a Medicare “grey card” to be established to protect older people’s right to care.

Denys Correll, national executive director of the Council on the Ageing, agrees that Medicare should be strengthened and says problems such as the blowout in pharmaceutical costs can be managed by price volume agreements between the government and manufacturers.

Goss points out that anxiety over costs tends to ignore benefits: “There’s no need for doom and gloom if any increase in expenditure produces more benefits than costs in terms of older people being healthier, suffering less pain and having a lower chance of dying.”
An extraordinary number of older people are involved in the informal economy through their care of grandchildren, he points out.

“There’s often strong interests behind the position saying that `the world is falling apart’,” says John McCallum, professor of public health at the University of Western Sydney. He is concerned that an atmosphere of pessimism might encourage the belief that more health and aged-care services must be privatised if the government is not to go bust. In his view, “there are serious issues and they do have to be dealt with, but they’re not necessarily going to break the bank or destroy the Australian way of life”.

First published in The Age.