Ahead to Future Implications of the Era of AgingFrom Planning for the Future
p. v, published 2002
Part of the Kentucky Long-Term Policy Research Center’s mission, as outlined in its founding legislation, is to serve as a catalyst for change in the way government decisions are made by providing insight into the broader context. To do so, the Center was charged with responsibility for considering the long-term implications of policy, critical trends, and emerging issues that may have a significant impact on the state. What follows is largely an analysis of findings from a 2000 survey developed jointly with the University of Kentucky (UK) Sanders-Brown Center on Aging and conducted by the UK Survey Research Center. It is complemented by more recent survey findings. Together, they offer critical insight into the implications of Kentucky’s aging population. While many of the findings here have been presented in other forms and venues, we make them broadly available to policymakers and the public with this report. It should be of interest to all who understand and recognize the importance of anticipating the future and the growing population of older citizens who will be central to it.
From Planning for the Future
p. xiii-xviii, published 2002
A growing portion of the world’s people, particularly those in developed countries, is reaching what we once thought of as old age, and most can expect to live longer than past generations. Here in Kentucky, the phenomenon known as the aging of the population is expected to be pronounced. Between 1990 and 2000, the highest rate of growth within any age group here and nationally was for those aged 45 to 54 years. This high rate of growth emerged from the aging of the post-World War II birth cohort known as the Baby Boom. Members of the largest generation in history, they are expected to begin retiring from the labor force around 2010 and depend at least partially on a trio of federal programs—Social Security, Medicare, and Medicaid. Expenditures by these programs, widely known as entitlements, comprise a substantial portion of the federal budget. Already, partially state-funded Medicaid programs are experiencing fiscal problems in the vast majority of states, as they absorb unanticipated, rapidly rising health care costs and the impact of increased longevity. While about 70 percent of Medicaid enrollees are families and children, a nearly equal percentage of program expenditures go to the care of the elderly. As our population ages, increased demands on these programs could strain budgets at every level.
Anticipating the almost certain fiscal as well as the myriad cultural, social, and physical changes that lie ahead is critically important for local, state, and federal policymakers. Faced with the difficult challenge of fashioning budgets that are adequate to meet today’s enormously complex challenges, policymakers also must anticipate the simple and widely embraced mandate to care for society’s elders, particularly those who are frail and cannot care for themselves.
Questions about our future abound, from the extent of the fiscal challenge that lies just ahead on the horizon to the ethics of end-of-life decisionmaking. How will we meet the cost of entitlements to the old? How prepared are aging Kentuckians to meet the cost of an extended retirement? How healthy are they? What do they expect from government services? Whom do they believe should bear the responsibility of caring for elders? Will a large retired population translate into higher levels of volunteer activity and a fuller participation in the life of our communities?
The following report discusses these and other issues related to the aging of Kentucky’s population. It is based, in large part, on the findings of a 2000 survey of Kentuckians, aged 45 and older, that was developed jointly by the Kentucky Long-Term Policy Research Center and the University of Kentucky (UK) Sanders-Brown Center on Aging. Comparisons with U.S. data are based upon survey questions that were used with the permission of the Employee Benefit Research Institute (EBRI), which, in conjunction with Mathew Greenwald & Associates and the American Savings Education Council, conducts a national Retirement Confidence Survey annually. Our survey was conducted by the UK Survey Research Center. The 18-page mail questionnaire explored financial preparedness, health care provisions, health status, opinions about government programs, and other issues relevant to the aging of Kentucky’s population. What emerges is a profile of the Commonwealth’s current and coming retirees and the implications that this profile carries for the future of the state.
Planning is key to a prosperous retirement. Until recently, the U.S. trend had been one of increasingly early retirement ages and thus more prolonged dependency on entitlement programs, an unaffordable societal luxury in the eyes of some. For several years, however, the average retirement age has remained unchanged. At the same time, much more is expected of current workers, many of whom will have to rely upon the fruits of their own investment strategies. Access to employer-sponsored pensions has declined steadily, and rapidly rising health care costs are having a similar effect on health care benefits that once provided for many throughout retirement. Out-of-pocket health care expenses are also cutting deeply into retirement income. For these and other reasons, planning for retirement has assumed new dimensions and become increasingly important. In addition to savings and Social Security, earned income and health insurance to close Medicare’s gaps are regarded as central to retirement planning.
But no matter how well seniors plan, the unanticipated often occurs. Indeed, we find that 60 percent of Kentucky’s current retirees retired earlier than they had planned while only a small percentage (6 percent) retired later than planned. As the EBRI has found nationally, health problems are most often the reason people retire earlier than planned. A higher percentage of Kentuckians than nationally, however, retired earlier than planned due to health problems, and, not surprisingly, few Kentucky seniors retired early because they could afford to do so. These findings reflect the generally poor health status of Kentuckians as well as disproportionately high poverty levels within the state.
Some evidence suggests that changing circumstances are already influencing choices. Census data show that a slightly larger percentage of seniors are now in the labor force. And while the extent of the impact remains unknown, recent stock market losses have undoubtedly forced more able retirees back to work and dramatically revised the retirement plans of current workers.
Because far fewer current workers have access to employer-sponsored, defined-benefit pension plans, only about a third of Kentucky’s coming retirees expect such plans to be their most important source of retirement income, compared to 39 percent of current retirees. Instead, retirement income to supplement Social Security will be based largely on investments of their own design and on defined contributions to 401(k) plans, many of which have been depleted by recent stock market losses. About a quarter of coming retirees told us that a 401(k) plan at work or personal savings would be their most important source of income, compared with about 6 percent of current retirees.
While we find that nearly three quarters of Kentucky’s current retirees say their standard of living in retirement is about the same as or better than before retirement, far fewer report a better standard of living than EBRI found at the national level. Further, those who rely most on Social Security are nearly twice as likely to say their standard of living is worse or much worse. These findings do not bode well, as the “oldest old,” those aged 85 and older, are relying more and more heavily on Social Security, as savings and investments are depleted and, in some cases, employer pension plans have dissolved with corporate mergers and business failures.
We also find reason for optimism in that coming retirees are far more likely to report saving for retirement. However, that more than a third of current workers report having saved less than $10,000 suggests that present savings habits are not adequate to the challenge of replacing earned income. It is perhaps for this reason that more than two thirds of current workers report that they plan to work in retirement “to make ends meet.”
Thus, the improved circumstances that the bountiful 1990s yielded for Kentucky’s elders may prove to be yet another demographic anomaly, an isolated period of prosperity that could not be sustained. Indeed, tomorrow’s retirees may need significant financial assistance, and that has profound implications for public budgets at every level.
The public debate about the cost and availability of health care to seniors has revealed a significant inadequacy in the Medicare Program: the omission of prescription drug coverage. A minor cost for most at the time Medicare legislation was enacted, prescription drugs have become more costly and central to health care delivery. Thus, health insurance to close Medicare’s gaps is now a key component of retirement planning. At present, only the poorest among elders in Kentucky have access to publicly financed prescription drug coverage through Medicaid. As employer-provided health insurance for retirees becomes an unsustainable lifetime benefit for more companies, the inadequacies of Medicare are likely to be even more pronounced.
We found that a significant percentage of Kentuckians expect Medicare to be a “major” source of health care, another potential weakness in their financial preparedness for the future. The health care expectations of coming retirees, however, differ from those of current retirees. A smaller portion of the Commonwealth’s coming retirees expects to rely on Medicare as their most important source of health care.
Because the cost of long-term care is borne mostly by state-financed Medicaid, it is a key concern for states. While the percentage of older Americans in nursing homes has declined, the sheer numbers of seniors in the future will almost certainly increase the need for long-term care in institutions. Families, who provide the vast majority of long-term care for frail elders in their homes, will also shoulder increased personal and financial burdens. Public finances will also be strained. Nearly half the states, including Kentucky, have created mechanisms to encourage citizens to purchase long-term care insurance to help reduce this public cost. A higher percentage of Kentuckians than national data suggest is accurate report that long-term care insurance will be a source of health care. Many assume they have this coverage when, in fact, they do not, and our findings do not confirm that individuals have long-term care insurance, merely that they believe it will be an important source of health insurance. National data suggest only a small percentage of the population has long-term care insurance.
Our findings confirm that out-of-pocket expenses for health care and health insurance are considerable burdens for older Kentuckians. Almost half of older Kentuckians report that they spend more than $3,000 a year on health care. These expenses are, of course, far more burdensome for poor Kentuckians, who report spending between 14 percent and 38 percent of their incomes on health-related expenses. Not surprisingly, a majority of aging Kentuckians say they cannot afford their medical expenses.
In spite of its current inadequacies, the future viability of the Medicare Program is central to the well-being of aging Kentuckians. We found that current retirees are far more optimistic about the program’s future than coming retirees. However, nearly identical majorities of both coming and current retirees express a lack of confidence in their abilities to meet their medical expenses.
Again, these findings suggest considerable vulnerability among aging Kentuckians. Broadly, they expect or plan to rely heavily on a program that no longer meets their needs, shoulder health care expenses they cannot afford, and have limited confidence in their ability to meet their future medical needs and in the very program they expect to rely upon most heavily.
Although the health status of our older generation may be one of the most important factors influencing the future needs of this population, it may also be one of the most difficult to predict. While increasing frailty is usually an unavoidable consequence of age, individuals do have some control over the extent of their physical and mental decline. A range of lifestyle choices have proven impacts on our overall health status. Those believed to have the most significant effects are abstinence from smoking, a healthy diet, regular exercise, and abstinence from or only moderate use of alcohol. Using these and other health indicators, we attempt to characterize some aspects of the health status of Kentucky’s aging population.
In general, proportionately more Kentuckians rate their own health as “fair” or “poor,” compared to those aged 45 and older nationally. This general health indicator is based on self ratings and is a summary measure that represents physical, emotional, and social aspects of health. Not unexpectedly, the proportions of those who report fair or poor health increase steadily with age for both Kentucky and the nation. Using this measure, however, we found that reliance on Medicare is a significant indicator of poorer health status in Kentuckians, a finding that raises questions that should be further explored.
Poor lifestyle choices may be the potential cause behind the relatively poorer health status among Kentuckians. In general, older Kentuckians smoke more, weigh more, and are less physically active than their national counterparts. A greater proportion of older Kentuckians, approximately 23 percent, smoke, compared with 17 percent nationally. On average, both older Kentuckians and older citizens nationally can be classified as “overweight,” although measures indicate that Kentuckians are slightly heavier. In addition, proportionately fewer Kentuckians engage in any kind of regular physical activity, including such activities as gardening and taking walks. Fewer than half of Kentuckians say they have made the decision to diet, lose weight, exercise, stop smoking, or stop drinking in the previous five years to improve their health, but we do not know how many had made these choices previous to the five-year period. Poor lifestyle choices in general have manifested themselves in higher death rates among Kentuckians at all ages, including higher occurrences of death due to cancer, heart disease, stroke, and diabetes.
While these statistics paint a gloomy picture, some evidence indicates that working Kentuckians may be slightly healthier seniors than current retirees. Statistical regression analysis shows that although the likelihood of limitations in various levels of physical functioning, from vigorous activities down to the most basic functions of eating, dressing, and bathing, does increase with age for both groups, nonretirees face significantly lower probabilities than retirees. That is, given age, income, education, and other demographic characteristics, current workers are less likely than their retired counterparts to be physically limited at each age level. This may be attributable to higher levels of education and higher incomes among coming retirees as compared with Kentucky’s current retirees. Both factors significantly affect health outcomes.
To enjoy a high quality of life seniors need more than their physical health. Indeed, mental and social health have a profound effect on well-being in later years. Poor mental health is an often overlooked problem among seniors, especially elderly men, who are the highest risk group for suicide. Using older Kentuckians’ answers to questions about how nervous, sad, happy, peaceful, and contented they are, we determined that our age-45-and-older population is about as well off as those nationally. Social engagement has been shown to increase longevity and quality of life among elders. Our data also show that health limitations lead to lower social activity among Kentucky’s elderly.
Awareness of the possible health struggles Kentucky’s aging population faces is a first step in promoting a better quality of life among older Kentuckians. Policies that promote healthier lifestyles and raise awareness of the need for a more holistic approach to health care, one that includes mental and social health aspects, could help preempt some of the health complications that will lead to higher future health care costs. In addition, growing awareness among our communities of the special needs and unique risks afflicting our elderly population could help us adequately prepare to meet needs and reduce the risks that lead to poor quality of life in their later years.
A number of polls indicate that Americans remain concerned about social issues such as health care. For example, a mid-year NPR/Kaiser/Kennedy School poll found that 67 percent of Americans believe Medicare should provide a prescription drug coverage for seniors. Ultimately, the reservoir of public sentiment will determine how and whether today’s programs that assist elders with medical care will be expanded or reshaped. To that end, we asked older Kentuckians, who are expected to comprise a powerful constituency in the years to come, a series of questions about their opinions on government support and eligibility criteria for programs that assist elders.
We found that substantial majorities of older Kentuckians believe government support for health care, from prescription drug coverage to assisted-living communities, is important. Older Kentuckians also say public support is important in providing for the long-term care and nursing home needs of older citizens. At present, Kentucky remains among the minority of states that have made no provision to assist seniors with prescription drug coverage in the face of rising Medicaid costs, and, unlike some states, does not provide Medicaid coverage for assisted-living facilities
We also asked survey respondents about the role that financial need should play in determining who will receive publicly financed benefits, whether or not they are currently available. Majorities of both coming and current retirees indicate that need should determine how much support for long-term care government provides, a position that is essentially an endorsement of the status quo. But these respondents most often indicate that a combination of families and government should work together to meet the needs of frail elders. Because most long-term care of frail elders is provided by families and friends, these responses appear to suggest, as many advocates have, that public support should complement and help support family care, rather than tacitly promote institutionalization.
Interestingly, we found that substantial majorities of respondents (80 percent or more) agree that financial need should determine how much public support older citizens receive from Medicare, which presently provides universal coverage based on age. They expressed similarly high levels of support for need- or income-based prescription drug coverage and hands-on help with activities that enable seniors to stay in their homes longer. Not surprisingly, when we examine these responses by income, we find that the more affluent Kentuckians are, the less likely they are to support using financial need to determine who will receive government assistance.
In the future, public pressure can only be expected to increase, as nearly identical portions of both coming and current retiree populations say government support is very important in providing medical care for older people. Moreover, if the opinions of Kentuckians are representative of elders in general, the future of core entitlements could take on an altogether different shape.
Beyond financial and health issues, other factors will affect older citizens in our society. They include transportation, end-of-life issues, elder-care services, volunteerism, and information technology. These social elements potentially influence the quality of life seniors will enjoy in retirement and, by extension, the effect that an aging population will have on society. Although mostly unrelated, they have a single underlying connection: they could dramatically affect the quality of life future elders enjoy.
As our health section indicated, the health care needs of tomorrow’s elders are not necessarily the same as those of today’s. That is, the care needs of our aging population are becoming increasingly diverse. A growing array of services has developed in response to these needs. Unfortunately, those community-based services provided by the government are not well-known among current and future retirees. About 9 percent or fewer of those questioned were very familiar with seven of the services offered by Kentucky’s Office of Aging Services. When we asked Kentucky’s general adult population (aged 18 and older) in 2002 about their satisfaction with the availability and affordability of high-quality elder-care services in general in their communities, we found that satisfaction diminished upon experience with these services.
The transportation needs of elders could become a growing problem, as poor health can severely limit the ability of seniors to drive or walk significant distances. For some, the issue is further complicated by their reluctance to be a “burden” to those who provide for their transportation needs though informal transportation has been shown to be the preferred mode among elders in rural and urban areas. More than a third of Kentuckians aged 75 and older reported that they did not drive a car in the preceding month. Thus, they depend on others.
The volunteer activity of Kentucky’s aging population serves two beneficial roles. In addition to its contribution to society, studies have shown that volunteering enables a higher quality of life, permitting older citizens to remain active and involved and easing the often difficult transition from “worker” to “retiree.” We find that coming retirees can be expected to volunteer more 10 years in the future than they do today. This is promising given that about 42 percent of Kentuckians aged 45 and older volunteer, on average, 10 hours per month.
Information technology is yet another conduit for keeping elders connected and engaged. We found that proportionately fewer elders had home access to a computer (36 percent) compared to all Kentucky adults aged 18 and older (55 percent); however, the percentage has grown since 1996 (28 percent). We found declines in the portion of our sample who were online as age increased as well. However, the 37 percent of Kentuckians aged 45 and older who reported in 2000 that they had accessed the Internet in the previous year is an improvement over the 27 percent found in 1998. In addition, national studies have shown that the number of online seniors is growing and that the enthusiasm of this group outpaces that of their younger counterparts in amount of time spent online and the number of unique sites visited.
Finally, an issue that will affect many older citizens and their families is end-of-life decisionmaking. Due to medical advances, older citizens can be subjected to medical procedures they would not choose to undergo. In turn, family members often are subjected to tremendous strain when faced with difficult choices, and society must deal with the moral ramifications of decisions made in the face of great uncertainties. Many argue that appropriate discussion and legal preparations for the inevitable are essential. We found that more than two thirds of Kentuckians have either let their families know of their wishes or made legal provisions regarding end-of-life care or have done both.
Broadly, the findings from this survey and other research offer reason for “cautious optimism.” That is, we find that tomorrow’s retirees, the object of much of the angst associated with the aging of the population, are better prepared for the future financially, more inclined to remain in the labor force beyond the traditional retirement age, and healthier. Additionally, they are more inclined to envision themselves becoming more engaged as volunteers in retirement and more likely to use computers, which many see as an invaluable resource and communications tool for seniors. Reasons for caution, however, are found in reported low levels of savings, poor lifestyle choices and health status, and high expectations of entitlement programs in which respondents express low levels of confidence.
Certainly, aging Kentuckians, a constituency that has historically demonstrated the highest rates of voter participation, view a range of government programs for older citizens as important and, by inference, think an expansion of Medicare in the form of a prescription drug provision is important. Significant majorities of aging Kentuckians also express the belief that entitlements, including Medicare, should be based upon financial need. These views about entitlements, however, diminish as income rises. Moreover, a balance of public support that complements care provided by families is the preferred choice among aging Kentuckians. If representative of the larger national population of older citizens, these views could shape a new policy landscape in the years to come, as this powerful constituency weighs in on issues that directly affect their well-being.
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