June 20, 2017

The boomer legacy: ageing without breaking the budget

A new book highlights urgent need for reform in health and aged care and particularly in facing a rapidly ageing population.

Helping the growing numbers of ageing baby boomers to age successfully will put unsustainable pressure on Australia’s health expenditure unless whole-of-systems health and aged care reforms are undertaken.

Health economics from theory to practice by Professor Simon Eckermann was launched at University of Wollongong today (June 20).

Professor Eckermann, Senior Professor of Health Economics at Sydney Business School University of Wollongong and the Australian Health Services Research Institute (AHSRI), said the book combined internationally recognised best methods for joint research, reimbursement and regulatory decisions to enable better policy making with community net benefit as the central focus for research and service provision in practice.

A key policy section of the book and subject of the Sydney public lecture is dedicated to the challenge of successful ageing of baby boomers, those born between 1946 and 1964, without breaking health and aged care budgets.

“The oldest of the baby boomers are now entering their eighth decade and in the next 12 years all of the baby boomer generation will be over 65.

"Further, their life expectancy at age 65 is now beyond 20 years and hence it is until at least 2045 where we’ll really face the challenge of ageing baby boomers,” Professor Eckermann said.

Contrary to popular wisdom, productivity commission research shows that ageing until relatively recently has not been a primary cause of increases in health expenditure.

Health expenditure impacts from ageing were protected by rapidly increasing life expectancy reducing high health costs associated with death.

Australian mortality rates between 1970 and 2002 more than halved for all ages between 33 and 77.

Critically, for Australia this meant that only about 5 per cent of the growth in per capita health expenditure or as a percentage of GDP, from 6.4 per cent in 1989-90 to 9.7 per cent in 2013-14, has been attributable to ageing.

“The other 95 per cent of growth in health expenditure has been due to increased use of expensive new medications and technologies and policies such as the private health insurance rebate, which while now costing more than $6 billion annually has failed in its stated objective of taking pressure off the public system,” Professor Eckermann said.

However, the protection that increasing life expectancy has provided against the cost of ageing won’t last as mortality rates have not fallen significantly for populations over 80 – the baby boomers will not live forever.

Maintaining current policies Australian health expenditure is projected to increase to at least 12 per cent of GDP by 2045, with half of that increase attributable to ageing, while aged care expenditure is projected to increase even more if ageing populations continue to be sent to nursing homes rather than successfully ageing in the community.

“Successful ageing without breaking the budget requires that health and age system policy reform is undertaken to address current inefficiencies, informed by research on age and dementia friendly communities, palliative care options that reflect palliative patient and community preferences and more generally better use of existing programs and technologies and more appropriate pricing and integration of new technology,” Professor Eckermann said.

Professor Eckermann’s book points to key whole-of-system reforms that enable successful ageing without breaking budgets, including:

• Creating age and dementia-friendly communities with low cost health promotion strategies and to enable safe and active ageing while living in the community - such as walking paths, community gardens, dementia friendly transport and shops;
• Dementia-friendly, safe and functional architecture for aged-care facilities, encouraging and enabling active and meaningful individual and community interactions;
• Palliative care options that reflect patient preferences and domains for finalising affairs with family and friends in their community of choice – usually at home – and minimising carer and family distress such as use of medicinal cannabis in intractable pain palliative populations;
• Research on better use of existing programs and technology and pricing new technology appropriately.

Investment in successful ageing of the baby boomer generation also benefits all those to follow in providing a pathway to successful ageing.

Additionally, baby boomer preferences to remain active in the community strengthens communities and their voice in decision making, while respecting aged rights and addressing inequalities.

“Successful baby boomer ageing pioneers for all, but effective and affordable reform needs to address dementia in the community and aged-care facilities and end-of-life and new technology challenges,” Professor Eckermann said.

A business-as-usual approach to ageing will not work with the looming ageing challenge and resource constraints.

“Now is the time to be having meaningful policy debates that lead to effective reforms.”