Meeting the Future Long-Term Care Needs of the Baby Boomers: How the Changing Structure of Families Will Affect Paid Helpers and Institutions

Grant Description: How do families choose among types of long-term care services for older adults and what will be the demand for these services over the next 40 years?  The researchers estimated a model of informal family care, nursing home care, paid home care, and residence in assisted living settings. The model showed the impact of health status, financial resources, family networks, and relative prices, determined in part by family characteristics and in part by public policy. They also used the model to simulate the effects of potential changes in public policy on long-term care decisions, including the impact of an expansion of Medicaid eligibility or of expansions in Medicare coverage of long-term care services. The objective of the project was to better understand how competing social, demographic, and economic trends combine to determine future demand for long-term care services. The researchers used cross-sectional data for adults 65 and older from the 2000 Health and Retirement Study to model factors that affect family decisions about long-term care. The simulation portion of the project used DYNASIM3 and coefficients estimated in the modeling portion of the project to forecast future demand for long-term care services over the next 40 years. (DYNASIM3 is a microsimulation model developed by the Urban Institute to forecast future demographic, social and economic characteristics of the population by simulating births, deaths, marriages, divorces, labor supply decisions, and earnings trajectories. DYNASIM3’s core characteristics have recently been updated with data from the late 1990’s.)

Policy Summary: Population aging signals a likely surge in the use of long-term care services. 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. Women’s rising labor force participation may also reduce their ability to provide informal care, and it is unclear whether men will fill the gap. This study projects to 2040 the number and percentage of people aged 65 and older with disabilities and their use of long-term care services. 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. Given uncertainty about future disability rates, the report shows outcomes for three different disability projection scenarios. Under the intermediate disability scenario, which provides the “best guess” of the future size of the frail older population, 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 results show that 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 aged 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 aged 25 to 64 will increase. 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. Over the same period the average number of paid hours of help per frail elder will increase by about 36 percent, from 163 hours per month to 221 hours, and total paid home care hours received by all frail older Americans will more than triple. Under the high disability scenario, total paid home care hours would almost quadruple under the high disability scenario. Today’s long-term care financing challenges will intensify in coming decades as the population ages. Improvements in disability rates alone will not resolve the dilemma. Medicaid pays for much of the long-term care services provided today, but only people with very low income and assets qualify. Private long-term care insurance coverage is rare. Increasing savings to finance future long-term care costs, by boosting private incentives to save or by setting aside public funds, would ease long-term care burdens for future generations of frail older Americans and their families.