January 18, 2011--Since the 1950s, smaller family sizes and longer life expectancies have steadily expanded the ranks of the elderly in many societies—a shift some commentators have dubbed the ‘Graying Revolution.’
Once considered a rich country phenomenon because of its origins in high national incomes and better personal health, the ‘graying’ trend has now reached developing and middle-income countries, according to new research by the World Bank. These countries are catching up, but largely without the economic means to cope with the social and economic challenges posed by such a profound demographic shift.
“Population aging is a global issue that is affecting, or will soon affect, virtually every country around the world, at a time when family support and other traditional safety nets have become less certain,” says Daniel Cotlear, co-author of a recent Bank report “Some Consequences of Global Aging,” and a lead economist in the World Bank’s Human Development Network.
“What we find is that many developing countries are getting older before they become more prosperous, which is the reverse of the OECD experience, and cause for worry,” he says.
Cotlear, who has another report coming out in early 2011 looking specifically at aging in Latin America, says it’s important to track falling birth and death rates to gauge the economic implications of expanding older populations.
He says that both life expectancy and fertility rates have changed dramatically over the last 60 years, and further changes are expected.
Life expectancy at birth grew by 11 years between 1950-55 and 2005-10 in more developed countries, but the gains have been much greater in less developed regions (excluding the least developed countries), where life expectancy increased by 26 years, and in the least developed countries, where life expectancy increased by 19.5 years. Further gains are anticipated in the coming decades.
Arguing Against A ‘Time Bomb’
Along with his co-authors Andrew Mason and Ronald Lee, Cotlear argues against the common ‘time bomb perception’ of aging populations and says that with smart policies in labor markets, social security, long-term care and public health in place, governments can manage the economic and social needs of their aging societies.
This point is amplified in another new report from the Bank’s Human Development Network, “Long-Term Care Policies for Older Populations in New EU Member States and Croatia: Challenges and Opportunities,” whichshows that new members of the European Union and Croatia are also facing a challenge many Western countries have been facing for years: aging populations leading to increased demand for long-term care services.
The problem is doubly challenging because there are fewer potential caregivers to care for older, more dependent people, while at the same time, a smaller working-age population has to finance the higher public spending needed for long-term care for older people.
“In looking at how other countries have approached this problem, it became clear to us that there really is no ‘one size fits all’ solution,” says Johannes Koettl, a co-author of the new report and an economist in the World Bank’s Europe and Central Asia Human Development team.
“From tax-financed social safety nets like Medicaid in the United States, to universal entitlements financed either from taxes as in Austria, or social security contributions as in Germany and Japan, what is clear, in all cases, is that some public risk-pooling is needed,” he says. “Based on our review, we are suggesting that new European Union member states and Croatia consider a universal system of basic protection for all individuals requiring long-term care service.”
Directions for Policy Reforms
According to the report, experiences from Organization for Economic Cooperation and Development (OECD) countries suggest several broad directions for future policy reforms:
- Medical to social services: Many dependent people and their families turn to the health sector, in particular, hospitals, when they need effective social care. Long-term care provided by the health system might not be sufficient.
- Community-based services: In most countries, there is a lack of community-based care such as day care, assisted living, and home-based care. Patients overwhelmingly prefer to be taken care of at home; in many cases, this is a more effective and affordable solution.
- More coordination: In particular, coordination is needed between health and social services, where fragmented financing and delivery of long-term care leads to cost-shifting between sectors at the expense of patients’ wellbeing. Patient-centered care coordination, in particular through joint needs assessments, is key.
- Shift from producing services to purchasing services: With caring for the elderly likely to take up more and more national economic activity during the coming years, the report says that the public sector cannot be expected to carry this responsibility on its own. The public sector needs to prioritize its core services and buy long-term care services from the private sector, including from nongovernmental organizations and community groups.
- In-kind benefits to cash benefits and vouchers: Cash benefits put patients in charge of buying the right type of care services and can play an important role in supporting informal care and spurring private sector response.
“It is easy to assume that the challenge of shrinking and aging populations in these countries will soon create pressure on the state and individual families,” says Sarbani Chakraborty, a Bank senior health specialist and a co-author of the report.
“Acting now to consider different policies and starting to implement them now provides an opportunity to mitigate those pressures over the long-term.”
