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Discussion Paper 07-04 in The Retirement Project series.
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The demand for long-term care services will surge in coming decades when the baby boomers reach their 80s. Declining family sizes, increasing childlessness, and rising divorce rates will limit the number of family caregivers. Rising female employment rates may further reduce the availability of family care, increasing the future need for paid home care. This study projects to 2040 the number of people ages 65 and older with disabilities and their use of long-term care services. The simulations show that even under the most optimistic scenario long-term care burdens on families and institutions will increase substantially.
Population aging, especially when the baby boomers reach ages 85 and older, signals a likely surge in the use of long-term care services. Long-term care is the help people need when physical or mental disabilities impair their capacity to perform everyday life's basic tasks. It is a leading cause of catastrophic out-of-pocket costs for families and involves substantial government spending, primarily through Medicaid and Medicare. Few people have insurance coverage against the high costs of long-term care. After impoverishing themselves, most people must turn to Medicaid, a means-tested welfare program, to pay for their long-tem care services. The quality of long-term care is often problematic, and a growing shortage of long-term care workers will likely further threaten service delivery.
Social and demographic changes create additional challenges. Much of the care received by frail elders is provided informally by the family, and adult daughters often assume primary responsibility for their parents' care. The availability of family caregivers may fall over time because of rising divorce rates, increasing childlessness, and declining family sizes. The rising labor force participation of women may also reduce their ability to provide informal care, and it is unclear whether men will fill the gap.
The future demand for long-term care depends heavily on how old-age disability rates evolve over time. Although evidence points to recent health improvements at older ages, there is no guarantee that these trends will continue. Disability associated with the rising prevalence of diabetes and obesity in the younger population might offset the future decline in disability rates at older ages.
The analysis combines new results from models of current long-term care use with simulations of the size and characteristics of the future population. Population projections were based on DYNASIM3, the Urban Institute's dynamic microsimulation model of the older population. Models of current long-term care arrangements were estimated based on data from the 2002 Health and Retirement Study, a nationally representative survey of older Americans. The projections show how changes in disability levels, financial resources, children's availability, and other characteristics will affect the future demand for paid and unpaid long-term care services.
Given uncertainty about future disability rates, the report shows outcomes for three different disability projection scenarios. The intermediate disability scenario, which provides the "best guess" of the future size of the frail older population, does not assume any particular trend in disability rates. Instead, projected rates depend on changing mortality rates, educational attainment, income levels, and age and race distributions. The high disability projections assume that old-age disability rates will increase by 0.6 percent per year from 2000 to 2014 and remain constant thereafter, reflecting recent disability increases at younger ages. The low disability projections assume that overall old-age disability rates will decline by 1 percent per year indefinitely. The analysis defines disability as any difficulty with the activities of daily living (such as eating, bathing, and dressing) or the instrumental activities of daily living (such as housekeeping, using the telephone, and managing money).
Future Size of the Frail Older Population
- The intermediate disability growth scenario shows that disability rates at ages 65 and older will decline by a few percentage points between 2000 and 2020 but then rise somewhat through 2040 as the earliest boomers reach their 80s. Between 2000 and 2040, this scenario projects that old-age disability rates will fall from 30 to 28 percent.
- Because the overall size of the older population will increase rapidly, the number of disabled older Americans will soar in coming decades. Between 2000 and 2040 the number of older adults with disabilities will more than double, increasing from about 10 million to about 21 million, according to the intermediate disability scenario.
- The disabled older population will grow faster than the younger population, likely raising the economic burden of long-term care. The intermediate disability scenario projects that in 2040 there will be only about 9 adults ages 25 to 64 to support each disabled older adult, down from about 15 younger adults in 2000.
- Even under the most optimistic disability scenario, which assumes that disability rates fall by 1 percent per year, the size of the disabled older population will grow by more than 50 percent between 2000 and 2040, and the number of disabled older adults for every adult ages 25 to 64 will increase.
Future Receipt of Paid Long-Term Care Services
- Between 2000 and 2040, the share of disabled older adults receiving paid help will increase from about 22 to 26 percent, while the share receiving unpaid help from children will fall from about 28 to 24 percent. These projections reflect declines in average family size and continued improvement in women's earnings prospects.
- Rapid population growth will substantially boost the number of older people using paid long-term care services. If future disability rates follow the intermediate growth scenario, the number receiving paid home care will more than double between 2000 and 2040, increasing from 2.2 million to 5.3 million. The number of older nursing home residents will also more than double over the period, increasing from 1.2 million to 2.7 million.
- The simulations show that even under the most optimistic scenario long-term care burdens on families and institutions will increase substantially in coming decades. If disability rates decrease steadily and substantially over time the number of older adults using paid home care will increase by three-fourths between 2000 and 2040 and the number in nursing homes will increase by two-thirds.
Help Hours Received by Disabled Older Adults
- Between 2000 and 2040 the average number of paid hours of help hours per frail elder will increase by about 36 percent, from 163 hours per month to 221 hours.
- The projected increase in the intensity of paid home care, combined with the increase in the size of the frail older population, will substantially boost the total number of paid home care hours received by older Americans. Under the intermediate disability growth scenario, total paid home care hours will more than triple between 2000 and 2040. Total paid home care hours would almost quadruple under the high disability scenario.
How long-term care arrangements actually evolve will depend heavily on future policy choices. Efforts to promote private long-term care insurance might add funding for future long-term care services and increase the use of paid care. Medicaid and Medicare expansions could also make paid services more affordable. However, problems recruiting and retaining long-term care workers could limit the availability of paid services and sharply raise costs. The financing and organization of long-term care is the third leg of retirement security for America's older adults as they age. It deserves more attention from policymakers to ensure that frail elders receive high quality care that is affordable to them and society.
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