Living longer, living poorer

Living longer. Living poorer.

The challenge of caring for a greying population

infocusIssue No. 67, April 2015

Here’s the good news: we are all living longer, not just from birth but our life expectancy at retirement has increased. By 2062 females are projected to be living 60% longer than in 1982 and male life expectancy at 65 will have almost doubledi. A lot of this is owed to increased survival from circulatory disease (and heart attacks in particular) and a related decrease in smoking prevalence. Coupled with generally falling or flat birth rates, in the West at least, as a result we are witnessing a profound demographic shift as the number of over 60s will double in the first half of the 21st century and the number of the oldest old (>85) will treble.

And here’s the bad news, while we are living longer, a third of our older age is spent dealing with profound ill-health. So for example, while the average 65 year old in 2010 could expect to live until their mid-80s, their last twelve years would be spent with disabilityii.

These changes have massive implications in almost all areas of public planning, from health and social care provision to volume of tax receipts as people exit the workplace. A glance of the newspaper headlines show that these are fast becoming urgent political problems being wrestled with across the globe,

Graph 1: Growth in over 60s and Alzheimer disease: UK

Proportion of over 60s with Alzheimer’s

from issues to funding the NHS in the UK, to the success of Obamacare in the USA and Abenomics in Japaniii.

As mentioned above, medical science’s success in tackling the mortality associated with the triple scourge of ischaemic heart

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Parkinsonian diseases. As graph 1 and 2 demonstrate, the number of over 65’s is directly correlated with a surge in these diseases. However, increases in single diseases is not the whole problem as one of the features of ageing is that ill-health and disability is seldom caused by one or even two chronic illnesses but a constellation of co-morbidity. Care costs for the elderly, whether funded by the state or individually, will consequently and exponentially increase as we live longer but in poorer health.

Should we be worried?

Given the elderly already consume three times more acute care services and ten time more long-term care than the non-elderly per capita, it is a simple fact of economics that governments cannot afford to fund the spiralling costs associated with this demographic change and the resulting need for elderly careiv. In the US for example, Medicare is predicted to run out by 2030v, and in the UK, while the Government has allocated the seemingly huge figure of £3.8bn for the ‘Better Care Fund’, and 57% of local government spending is on social care for the elderly, it’s clear such continued expenditure is unsustainablevi. Amongst the public, the idea that we must make our own

Graph 2: Global projected number of people over 50

with Parkinson’s Disease 2005-2030

China W. Europe USA India Russia Brazil Japan

disease, cancer and tobacco addiction has meant a rise in the prevalence of more insidious ill-health issues, particularly those associated with neuro-degeneration; dementias and

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Graph 3: Would consumers buy an insurance product that provided

funds for care in old age (their own care or that of a relative)?

Yes No Not sure

It is essential therefore, that the Life and Health Insurance industry provides affordable and accessible products to meet this increasing requirement for both disability and care provision in the over 60s. And we must go further than that, convincing the public that these products are not only available, but are an absolute need. Of course designing and pricing these products is tricky given the burden of risks involved.

provision for care needs is beginning to take root, with worries about old age care costs topping a list of financial worries for 45-65 year olds in a recent surveyvii. However, society appears to be lethargic about actually doing something about these fears as 90% of over 65 year olds have no long term care provisionviii.

However there are signs this may be changing. Research from The Syndicate 2015 shows there is a growing propensity, especially in the younger generations, to consider purchasing an insurance product to help fund care in old age. Nearly one quarter of the survey respondents claimed they would consider purchasing an insurance product to fund their care in old age, mainly ‘not to be a burden’ on others and society. These findings were particularly interesting when compared to the percentage that instead showed interest in purchasing an insurance product to fund relatives’ care, which was just 12% (see graph 3). Clearly there is a growing perception amongst consumers that funding care in old age should be an individual responsibilityix.

Lack of finance and poor financial planning leads ultimately to lack of choice, and choice is clearly important for end of life care as only around 3% would like to be cared for in a residential care home; the majority would prefer to be at homex.


Caring forrelatives

Their carein old age

23% 35% 42%

12% 49% 40%

Frailty

One way to measure this burden is to assess the prevalence of frailty. There is no precise universally accepted definition of frailty, but it is generally seen as an increased risk of poor health because of progressive decline in the function and capacity of multiple body systems. More simply it is a failure to ‘bounce back’ and be resilient to life events. As we age, we become more likely to die or be permanently ill. Frailty therefore is strongly correlated with age (see table 1).

Table 1: Presence of Frailty in Canada. Rookwood 2011xi

Age 15-39 40-69 >70

Relatively fit 61.5% 47.5% 22.6%

Less fit 25.9% 28.5% 30.2%

Least fit 10.2% 16.0% 25.0%

Frail 2.4% 8.0% 22.2%

There have been a number of attempts to classify what frailty precisely means; Fried and colleagues for example see it as a specific syndrome or phenotype, characterised by the presence of three of the following highly specific attributes; weight loss,

exhaustion, weakness (usually measured as grip strength), slowness and low activity measuresxii. Alternatively Rookwood and colleagues in Canada see frailty as a state that presents itself because of the accumulation of a set of deficits in a frailty index (FI); those with few deficits are ‘fit’ whilst those with many are ‘frail’. Typically a FI consists of around 30-70 deficits (see Appendix 1 for an example) ranging from the presence of certain diseases (Alzheimer’s, Parkinson’s, Diabetes etc.), disabilities (sight, hearing loss etc.) and functional abilities (dressing, washing, shopping etc.)xiii Numerous studies ranging from China, the USA, Canada and Europe have shown that a FI score of >0.15 (6 out of 40 deficits present for example) is a better predictor of death than chronological agexiv. Use of a frailty index could be an excellent method of differentiating between individual risks in the older population.

However, one of the flaws with a fully-fledged FI model is the complexity and number of variables involved in terms of assessing whether an individual is frail or not. Instead a modified, simpler and more understandable method would be to use assessments of Activities of Daily Living (ADL); this has a further advantage in that these are widely understood by the life insurance industry and are adequately adaptable in any disability product design.


any top-up care provision over and above that deemed essential.

Table 2: ADLs v IADLs

Activities of Daily Living (ADL)Instrumental Activities of Daily Living (IADLS)

Essential activities that are a requirement of life, these include:

• Bathing • Dressing • Communication • Feeding • Toileting• Movement between rooms

and/or in and out of bed

Devised by Lawton in 1969, these are actions or tasks that measure ability to perform in the general community setting, these include:

• Housework• Taking medications

as prescribed• Managing money• Shopping for groceries

or clothing• Use of telephone or other form

of communication• Using technology (as applicable)• Transportation within

the community

There is therefore clearly a need for the provision of financial products to enable people to pay for the care they need and expect without exhausting their lifetime savings or selling their homes. At Hannover Re UK Life Branch we have successfully worked with a number of clients on devising and creating products to meet

For example, having ADL disability adds roughly 10 years to age or halves life expectancy in older lives. In underwriting terms having at least 1 ADL disability is equivalent to 50-100% extra mortalityxv, xvi. There are several different scales of ADL (see table 2), but the two most common are basic ADL (widely used in Critical Illness insurance) and instrumental type (IADL). One way to differentiate between them is to think that they measure different stages of care need, IADLs assess whether a person requires assistance, whereas ADLs assess whether a person needs constant care. Both of these measures could be used as different triggers for different payment events. Of course ADL/IADL are very physical measures, they don’t capture any cognitive impairment (as in Dementia) until fairly advanced. A product aimed at long-term care should therefore also include provision for claim pay out for cognitive decline.

With the UK Care Act (May 2014) recently gaining royal assent, some of the issues around the sustainability of funding care and its impact on both public and individual finance are being addressed. However some fundamental problems remain; while this legislation safeguards that an individual should in their lifetime pay no more than a specific cap (currently £72,000), it excludes accommodation costs (the ‘bed and board’ fees) and



Appendix 1Variables in a typical Frailty Index.

FRAILTY

Physical Cardiovascular/

PulmonaryNeuro-degenerative Sensory Psychological Other Morbidity

• Falls• Activity level• Walking ability• Dressing• Bathing• Going out• Low/High BMI• Arthritis

• MI/Angina• Stroke• Hypertension• Tachycardia• Chronic Obstructive

Airways Disease• Bronchitis• Shortness of breath• Asthma

• Alzheimer’s• Dementia• Parkinson’s • Other cognitive

decline

• Hearing difficulty • Deafness• Eyesight problems• Cataracts• Glaucoma

• Depression• Low mood• Social isolation

• Cancer• Diabetes• Thyroid disease• Ulcers

these needs. This work has been derived from our experience in the health, life and longevity sectors. We would be delighted to discuss this or any other product innovation with you.

Paul EdwardsManager Medical Risk

Sources:i ONS http://www.ons.gov.uk/ons/dcp171778_345078.pdfii Later Life in the UK, October 2014, Age UKiii The Economist, ’Age Invaders’ 24 April 2014iv Jackson, R., Howe, N., and Peter, T., ‘The Global Aging Preparedness

Index’ 2nd Ed 2013. Centre for Strategic & International Studiesv Reuters, July 28 2014, http://www.reuters.com/article/2014/07/28/

usa-fiscal-health-idUSL2N0Q310320140728vi Age UK, Care in Crisis 2014, http://www.ageuk.org.uk/

Documents/EN-GB/Campaigns/CIC/Care_in_Crisis_report_2014.pdf?epslanguage=en-GB?dtrk%3dtrue

Continued overleaf

www.hannoverlifere.co.uk

vii Health Insurance and Protection Daily, ‘Old age care costs ‘top financial fear for 45-64 year olds’ 14 September 2014

viii Health Insurance and Protection Daily, ‘Over 90% of over 65s have made no plans for care and are confused about their options’ 8 October 2014

ix The Syndicate Research 2015, online omnibus research conducted in September 2014, 2,000 respondents, GB nationally representative weighted sample

x The Care Choice Gap, Consultus Care and Nursing Report, 16 September 2014 http://www.consultuscare.com/_app_/resources/documents/www.consultuscare.com/care-choice-gap/care-choice-gap-report.pdf

xi Rockwood, K, et al., “Changes in relative fitness and frailty across the adult lifespan: evidence from the Canadian National Population Health Survey”, Canadian Medical Association Journal, 2011

xii Moorhouse, P. and Rookwood, K. ‘Frailty and its quantitative clinical evaluation’ J R Coll Physicians Edinb 2012; 42; 333-40

xiii Fried LP, Tangen CM, Walston J et al. Frailty in older adults: evidence for a phenotype. J Gerontol A Biol Sci Med Sci 2001;56:M146–56. http://dx.doi.org/10.1093/gerona/56.3.M146

xiv Romero-Ortuno, R, et al., “The Frailty index in Europeans: an association with age and mortality”, Age and ageing, 2012, Vol. 41 (5),684-689

xv Keeler E .,‘The Impact of Functional Status on Life Expectancy in Older Persons’ J Gerontology A Biol Sci Med Sci. July 2010; 65(7):727–733

xvi Steineman, M.G., et al ‘All-Cause 1-, 5-, and 10-Year Mortality in Elderly People According to Activities of Daily Living Stage’ J A

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Health & Medicine

Living longer, living poorer