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Editorial Steve Morgan Centre for Health Economics and Policy Analysis, 429 - 2194 Health Sciences Mall, Vancouver, BC, V6T 1Z3, Canada Tel: +1 905 525 9140 ext 22122 Fax: +1 905 546 5211 [email protected] Jeremiah Hurley Department of Clinical Epidemiology & Biostatistics, McMaster University, 1280 Main Street West , Hamilton, Ontario, L8S 4M4 , Canada Tel: +1 905 525 9140 ext. 24593 Fax: +1 905 521 8232 [email protected] © Future Drugs Ltd. All rights reserved. ISSN 1473-7167 81 Health economic consequences of an aging population ‘The aging of the population is not going to overwhelm the healthcare system; related changes in the healthcare system may, however, be overwhelming.’ Expert Rev. Pharmacoeconomics Outcomes Res. 2(2), 81–83 (2002) In addition to the global phenomenon of increased human life expectancy and falling fertility rates, North America (as well as other developed countries) is experiencing a ‘demo- graphic wave’ as the children of the postwar baby boom flow through the age profile, dra- matically altering their cultures and economies along the way. The baby boomers, just now in their mid-50s, will have a pronounced graying effect on healthcare systems in the coming quarter century. While this demographic real- ity has been a backdrop for healthcare policy research and decision-making for years, today, with the boomers about to enter their golden years, the chorus of demographic rhetoric is reaching a din. Concern about aging and healthcare is understandable. With age comes a gradual decline in health status; chronic and acute ill- nesses become more likely, recovery slows and general physical and mental function- ing deteriorates. Not surprisingly, elderly individuals consume more healthcare resources than nonelderly individuals – approximately four times as much in developed countries [1]. When age-related differences in health expen- ditures of this magnitude are projected to the entirety of an aging population, what emerges is a crisis scenario for healthcare systems. Fortunately, the inevitable financial conse- quences of population aging are neither as dramatic nor as inevitable as they are often portrayed. The impact of an aging population on healthcare costs can be divided into two major components: changes in average healthcare needs as the population ages and changes in the type and cost of technologies used to meet those needs. Studies have routinely shown that, holding age-adjusted per capita healthcare expenditures constant, aging accounts for a minor share of health system cost increases [2– 6]. This would indicate that the former deter- minant of healthcare expenditures – changes in average healthcare needs as the population ages – is modest. Furthermore, estimates of the cost impact due to age-related changes in needs that are based on current or historical age-adjusted expenditures per capita might overstate the true needs of future aged generations. In part because of past technological advances, not to overlook social and economic change, there appears to be a trend toward increasingly ‘healthy aging’ that would exert a cost-mitigating influence. This poten- tial cost-mitigating influence is described by Fries as the ‘compression of morbidity’ [7]. The ‘compression of morbidity’ hypothesis is based on the conjecture that human life expectancy has historically been cut short of its natural limits because populations have (on average) been subject to high levels of early life health hazards – communicable disease and injury, as well as the scourges of war, crime and poverty. Through social, economic ‘Holding age-adjusted per capita healthcare expenditures constant, aging accounts for a minor share of health system cost increases.’

Health economic consequences of an aging population

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Editorial

Steve Morgan Centre for Health Economics and Policy Analysis, 429 - 2194 Health Sciences Mall, Vancouver, BC, V6T 1Z3, CanadaTel: +1 905 525 9140 ext 22122Fax: +1 905 546 [email protected] HurleyDepartment of Clinical Epidemiology & Biostatistics, McMaster University, 1280 Main Street West , Hamilton, Ontario, L8S 4M4 , CanadaTel: +1 905 525 9140 ext. 24593Fax: +1 905 521 [email protected]

© Future Drugs Ltd. All rights reserved. ISSN 1473-7167 81

Health economic consequences of an aging population‘The aging of the population is not going to overwhelm the healthcare system; related changes in the healthcare system may, however, be overwhelming.’Expert Rev. Pharmacoeconomics Outcomes Res. 2(2), 81–83 (2002)

In addition to the global phenomenon ofincreased human life expectancy and fallingfertility rates, North America (as well as otherdeveloped countries) is experiencing a ‘demo-graphic wave’ as the children of the postwarbaby boom flow through the age profile, dra-matically altering their cultures and economiesalong the way. The baby boomers, just now intheir mid-50s, will have a pronounced grayingeffect on healthcare systems in the comingquarter century. While this demographic real-ity has been a backdrop for healthcare policyresearch and decision-making for years, today,with the boomers about to enter their goldenyears, the chorus of demographic rhetoric isreaching a din.

Concern about aging and healthcare isunderstandable. With age comes a gradualdecline in health status; chronic and acute ill-nesses become morelikely, recovery slowsand general physicaland mental function-ing deteriorates. Notsurprisingly, elderlyindividuals consume more healthcare resourcesthan nonelderly individuals – approximatelyfour times as much in developed countries [1].When age-related differences in health expen-ditures of this magnitude are projected to theentirety of an aging population, what emergesis a crisis scenario for healthcare systems.

Fortunately, the inevitable financial conse-quences of population aging are neither asdramatic nor as inevitable as they are oftenportrayed.

The impact of an aging population onhealthcare costs can be divided into two majorcomponents: changes in average healthcareneeds as the population ages and changes inthe type and cost of technologies used to meetthose needs. Studies have routinely shownthat, holding age-adjusted per capita healthcareexpenditures constant, aging accounts for aminor share of health system cost increases [2–

6]. This would indicate that the former deter-minant of healthcare expenditures – changesin average healthcare needs as the populationages – is modest.

Furthermore, estimates of the cost impactdue to age-related changes in needs that arebased on current or historical age-adjustedexpenditures per capita might overstate thetrue needs of future aged generations. In partbecause of past technological advances, not to

overlook social andeconomic change,there appears to be atrend towardincreasingly ‘healthyaging’ that would

exert a cost-mitigating influence. This poten-tial cost-mitigating influence is described byFries as the ‘compression of morbidity’ [7].

The ‘compression of morbidity’ hypothesisis based on the conjecture that human lifeexpectancy has historically been cut short ofits natural limits because populations have (onaverage) been subject to high levels of earlylife health hazards – communicable diseaseand injury, as well as the scourges of war,crime and poverty. Through social, economic

‘Holding age-adjusted per capita healthcare expenditures constant, aging accounts for a minor share of health system cost increases.’

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Morgan & Hurley

82 Expert Rev. Pharmacoeconomics Outcomes Res. 2(2), (2002)

and technological advances, the causes of premature mortalityare prevented or delayed.

The impact of delayed mortality on age-adjusted morbidity(or age-related healthcare needs) will be determined by twocountervailing factors. If advances have merely resulted in the‘salvaging’ of otherwise unhealthy individuals, then age-adjusted needs would increase. Alternatively, if gains in lifeexpectancy have arisen from the prevention of illness altogether,or decreasing the severity of illness that occurs, it is possiblethat the age-adjusted healthcare needs decline. The currentbody of evidence appears to favor this latter hypothesis. Today’sseniors seem healthier than those of yesteryear [8]. The implica-tion for health systems is that the average age-adjusted needs ofthe population are declining.

The compression of morbidity also has implications on the‘cost of dying,’ which may exert a further mitigating influenceon healthcare costs. Many have observed that a disproportion-ate share of healthcare expenditures is spent on individuals inthe last years of their life. Under ‘healthy aging,’ morbidity iscompressed into the latest years oflife – those closest to the naturallimits of human life expectancy –wherein illness and ultimatelydeath are less avoidable due tosenescence. The tendency towardintensive provision of ‘heroic’ medical intervention may beweaker when the very old are struck with life-threatening ill-nesses, as evidenced by the fact that healthcare interventionsnear the end of life are less dramatic and less costly among theoldest old [9]. If this continues to be the case, then as an increas-ing share of the population approaches the limits of a naturallife, the average costs associated with death will decline.

The preceding arguments predict reduced health expendi-tures if one holds constant the technologies used to meetgiven levels of need. Such an assumption is naive in theextreme. Substantial increases in healthcare expendituresobserved in recent years have resulted from changes in age-adjusted expenditures per capita driven by the (difficult toseparate and quantify) forces of price inflation and technolog-ical change [6]. If history is a guide, changes in the type andcost of technologies used to meet existing and expandinghealthcare needs will be the dominant source of healthexpenditure inflation in coming years.

Technological change is interrelated with population aging.Stakeholders in the healthcare sector have long been anticipat-ing the day when the baby boomers enter their golden years.Anticipation of the market created by the aging of the baby

boomers has steered significant investment toward the devel-opment of technologies that ‘lengthen and improve the qualityof life for seniors’ [10]. Approximately two thirds of the prod-ucts in clinical testing today are for the treatment of diseasesthat will affect the elderly. Furthermore, we appear to be onthe verge of a genomic revolution in the identification andtreatment of illness. Related changes may be profound in thisera of aging populations.

Advances in predictive genetic tests are changing the con-cepts of healthcare need for those identified at risk of late-onset illnesses, such as Alzheimer’s disease, cancer and heartdisease. With many of their parents now experiencing thesediseases, the baby boomer generation is increasingly interestedin the early detection and treatment of related risk-factors.Consequently, a potential for rapid adoption of new genetictests and technologies lies in the boomers’ anticipation of thelatter stages of their lives.

The evaluation and rationing of predictive genetic tests andrelated preventative therapies will be critical for sound policy-

making in the coming decade.This task may prove more difficultthan evaluating treatments for risk-factors now commonly screenedfor. Treatments used to manageclinical risk-factors – such as blood

pressure or cholesterol levels – have historically been approvedbased on changes in the biological marker as a surrogate (albeitan imperfect one) of their impact on long-term health. It is asyet unknown whether valid surrogate measures of outcomeswill exist for treatments targeting genetic risk-factors. The chal-lenges created by early detection of genetic risk-factors mayforce radical changes in evaluation methods, clinical trials andeven patent length in order to be certain that value for money isattained from the related technologies.

In summary, the aging of the population is not going to over-whelm the healthcare system; related changes in the healthcaresystem may, however, be overwhelming. How healthcare sys-tems respond to the combined influences of population agingand the emergence of age-related healthcare technologies willbe the most important determinant of healthcare spending incoming years. Fortunately, policy can exercise some controlover this. Wisely guided, the inflationary influence from tech-nological adoption by the elderly and the near-elderly, shouldbe matched by proportionate welfare gains. The challenge forthose in the fields of health technology assessment is to conductanalyses that identify which emergent technologies representvalue for money relative to the available arsenal of treatments.

‘As an increasing share of the population approaches the limits of a

natural life, the average costs associated with death will decline.’

References

1 Anderson GF, Hussey PS. Population aging: a comparison among industrialized countries. Health Aff. (Millwood) 19(3), 191–203 (2000).

2 Barer ML, Evans G, Hertzman C. Avalanche or glacier? Healthcare and the demographic rhetoric. Can. J. Aging 14(2), 193–224 (1995).

3 Barer ML et al. Aging and healthcare utilization: new evidence on old fallacies. Soc. Sci. Med. 24(10), 851–862 (1987).

4 Fuchs VR. Though much is taken’: reflections on aging, health and medical care. Milbank Mem. Fund Q. Health Soc. 62(2), 143–166 (1984).

5 Lubitz J et al. Three decades of healthcare use by the elderly, 1965-1998. Health Aff. (Millwood) 20(2), 19–32 (2001).

6 Evans RG et al. Apocalypse no: population aging and the future of healthcare systems. Can. J. Aging 20(Suppl. 1), 160–191 (2001).

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7 Fries JF. Aging, natural death and the compression of morbidity. N. Engl. J. Med. 303(3), 130–135 (1980).

8 Cutler DM. Declining Disability Among The Elderly. Health Aff. (Millwood) 20(6),

11–27 (2001).

9 Levinsky NG et al. Influence of age on Medicare expenditures and medical care in the last year of life. JAMA 286(11), 1349–1355 (2001).

10 PhRMA. New Medicines in Development for Older Americans. Pharmaceutical Research and Manufacturers of America, USA (2001).

Forthcoming articles in Expert Review of NeurotherapeuticsOur sister publication, Expert Review of Neurotherapeutics, addresses all issues relating to advances in this key area of healthcare. Below are listed some of the forthcoming articles:

• Intrathecal methylprednisolone for postherpetic neuralgiaWilliam M Landau, Washington University, MO, USA

• Acetyl-L-carnitine as a possible therapy for Alzheimer's diseaseJay W Pettegrew, University of Pittsburgh, PA, USA

• Designing controlled studies in ADHDDavid Coghill, University of Dundee, UK

• Treatment of central neurocytomasMarc C Chamberlain, University of Southern California,CA, USA

• Treatment of myoclonic epilepsy syndromes of infancyand childrenMichael Duchowny, Miami Children's Hospital, FL, USA

• Clomipramine for obsessive-compulsive disorderDavid R Rosenberg, Wayne State University, MI, USA

• New treatments for cluster headacheTodd D Rozen, Cleveland Clinic Foundation, OH, USA

• CREB (cyclic AMP (cAMP) response element binding protein) and depressionJohannes Thome, Mannheim University, Germany

• Stem cell therapy for multiple sclerosisTimothy L Vollmer, Yale University, CT, USA

For further information regarding Expert Review of Neurotherapeutics, please contact:Laura McGovern, Commissioning Editor, Expert Review of Neurotherapeutics, Future Drugs Ltd, Unitec House, 3rd Floor, 2 Albert Place, Finchley Central,London N3 1QB, UK, Tel.: +44 (0)20 8349 2033, Fax: +44 (0)20 8343 2313, [email protected]