Population ageing is a natural part of demographic development, so why is it increasingly seen as a burden?
We discuss population ageing with Joan Costa-i-Font, who is a professor of health economics and leader of the Ageing and Health Incentives Lab (AHIL) at The London School of Economics and Political Science.
People are living longer than they have ever done before; according to the World Health Organization (WHO), the number of people aged 60 and older globally will increase from 1.4 billion in 2030 to 2.1 billion by 2050. While life expectancy growth is a positive reflection of how individual and environmental health has developed, ageing is increasingly seen as a burden across the whole spectrum of society. Surging healthcare costs, a declining working-age population and unsustainable pension models are just some of the factors often cited as inevitable consequences of an ageing society. Yet, given this predictable and inevitable demographic trajectory, and the consequences of not creating an environment that enables people to live well for longer, it is vital that we reframe the narratives and policies around ageing. To discuss this, Lorna Rothery spoke to Joan Costa-i-Font who is a professor of health economics and leader of the Ageing and Health Incentives Lab (AHIL) at The London School of Economics and Political Science.
How would you describe the current narrative and attitudes around population ageing?
The average age of the population is increasing, and this is a phenomenon happening worldwide, though it is more rapid in some areas than others. As a result, questions are arising about how this will impact the health system and the economy. Despite these concerns, there are many positives to population ageing. The United Nations needs to update its definition of ‘old age’ because people that reach a certain age that we would typically regard as ‘old’ are in much better shape now than they were a few decades ago. We are seeing people working into their 70s; for instance, in academia, the retirement age does not really exist anymore and many academics in their 70s are still very active.
There is a lot of age discrimination, so we need to address these stereotypes. Ageing should not be reduced to simply getting older but reframed to how we prepare for getting older and staying active throughout our lives, and we need incentives to help us do that. We must overcome cognitive and economic barriers that society has constructed around people over a certain age that limit them from engaging in healthy activities. Equally, if people reach a certain age in good shape, that is not going to cause an expansion in healthcare expenditures.
As a society, we all want to remain young but eventually we all age, and the ageing society will expand so we must stop putting a greater value on youth as it simply sets us up for failure. We need to react quickly to prevent age discrimination, for instance, in the labour market where people may not be hired because of their age. There should be no barrier for older people; every single service in society will have to adjust to ageing populations and so these age-related stereotypes need to be mitigated.
How is the ageing population impacting healthcare expenditures and the wider economy?
Healthcare expenditures result from a need for care. These days, people are reaching their eighties with one or two comorbidities that may develop into a chronic condition requiring multiple check-ups and treatment etc., which, in turn, can become very expensive for the health system. So, it is not ageing itself but what comes with it. Chronological ageing is not the issue here, it is about delaying the onset of age-related diseases and conditions.
Another key consideration in relation to ageing is the pharmaceutical industry; one of its most lucrative markets is technologies for people that suffer from age-related comorbidities. A big chunk of what we attribute to the effects of ageing on health spending is to do with these technologies. The fact that most of the new technologies address the concerns of older people is supply induced; it is not that people get older and demand more care, they need certain types of care and there is an industry catering for them and making a business out of people ageing poorly.
One of the consequences of ageing is the expansion of the silver economy; if there are more people over 50, services will have to change to cater to those people and the health system will have to expand its social – or- long-term care sector. The care sector is not part of the healthcare sector, and is very underdeveloped and because of that lack of funding, individuals end up in hospitals and using the health service inappropriately. When individuals do not have sufficient access to or support from the care sector, they must turn to the healthcare sector, which then makes the whole system inefficient and costly. One of the consequences of population ageing must therefore be the growth of the care sector.
Politicians have been trying to figure out how to effectively fund social care for the past 20 years, and they have not succeeded; we are facing a huge crisis because the care sector is not funded properly and this was brought to the fore during the pandemic when lots of older people died in nursing homes as a result of that underfunding.
Most countries in Europe, except for the Netherlands, Germany and more recently, Spain, do not consider social care as a service that needs to be supported by the government; it is a private matter. If you need care, your children should take care of you. The problem is that government policy eventually impacts the health system and makes it more inefficient; this subsequently affects the carers themselves who cannot work full time, which reduces productivity. Likewise, if the needs of the person being cared for are not met this can impact their mental health and many older people are living with depression today, which again impacts the health system.
Beyond the social care crisis is the pension crisis. It is now not uncommon for people to live into their 90s, a retirement age of 65 is therefore arbitrary. We should, however, distinguish the kind of jobs that people do; if you are a miner, for instance, it makes sense to retire in your 60s, but if you are a professor, you can continue to work into your 80s. Retirement is therefore another issue associated with population ageing. There is a lot of uncertainty about the effects of ageing, especially in the labour market.
Can we estimate how population ageing and changing demographics might impact the future demand for healthcare? What are the limitations associated with this?
There is a lot of uncertainty in predictions, and they are very linear; they consider how the world will look in the future assuming that it will be exactly as it is today, but it is very unlikely that the world will be like it is today in ten or 20 years’ time.
We cannot predict future demands or behavioural change. The development of healthcare demands is influenced by an individual’s choices and their surrounding environment throughout their life. Equally, healthy living and healthy behaviours are predominantly treated as something individuals navigate privately as opposed to a public health issue.
As humans, we are innately programmed to conserve energy so that means we need to be incentivised to stay active, and when it comes to food, we should regulate what the food industry is adding to products because there is a lot of ultra-processed food that is going to cause issues for the health system. I hope we can do something to improve health behaviours so that when people reach old age, they are less likely to need healthcare. There is a lot that we can do on the social determinants of health and the effect of those social determinants is often not accounted for in estimations.
Estimates on pensions are a bit more reliable because we know more about life expectancy. Governments will increasingly provide pensions that will only cover a smaller and smaller percentage of people’s earnings and will be linked to life expectancy. Right now, many pension systems are changing to provide a pension that is a proportion of the lifetime income, as opposed to the last – and typically larger – income. In academia, for example, pensions are currently 40% of your last salary and now this has changed to lifetime salary.
What are some of the opportunities associated with population ageing?
As the retirement age increases, pensions may be abandoned altogether, and people simply work part-time to have a better work-life balance. Some people may not want to retire because it provides them with a sense of identity and social interaction, but again, it depends on the nature of the job.
If productivity increases, we will have more resources to fund pensions; these schemes can only exist if productivity levels increase. In the UK, productivity has stagnated in the last decades, which is going to limit the growth of the pension system. If you have more people using pensions and fewer people contributing to or funding them, coupled with stagnating productivity, those contributions will not go as far. Equally, if inflation drops and the economy becomes more stable, then you can calculate the pension or income that people need with more precision.
We have seen the expansion of social care funding in a number of European countries such as Spain and Germany whereby part of your salary is contributed to social insurance for long-term care. Another initiative in the Netherlands, which is helping to tackle the housing crisis and loneliness, is providing younger people who need access to housing with accommodation shared with older people who are on their own. With the expansion of digital healthcare and telehealth, there are discussions now on having ‘home hospitals’ whereby people are treated at home.
Ageing is not something that simply happens in old age, if we want to mitigate the challenges associated with ageing, we need to incentivise people to look after their health earlier in life, particularly as they reach middle age. Any policies that support healthy behaviours will, in turn, support the ageing process.
This article is from issue 25 of Health Europa Quarterly. Click here to get your free subscription today.
