Jane the Actuary Retirement

Forbes post, “Does Aging-In-Place Work? What We Don’t Know Can Hurt Us.”

Originally published at Forbes.com on June 11, 2022.

Aging-in-Place — most of us think of this as the decision, as we get older, to stay in our longtime family homes, even as increasing infirmity or cognitive decline makes this harder. We know there are support programs available, providing home health aides, assistance with yardwork or a wheelchair ramp, a “senior freeze” to keep property tax increases at bay, and so on. And our homes hold so many memories and are a source of affirmation of the success we’ve had in our lives.

But is aging-in-place really the right decision? Or, put another way, does it “work”? Is it the right path for us all to take as we age, or would we be better off if we moved somewhere more suitable — a single-level house, or a condo in an elevator building, or a home near public transportation, or any of the communities designed for older adults? Would we miss our neighbors in our old communities, or quickly adapt and be glad we’d gotten past our hesitancy?

In the book Aging in the Right Place from 2015, author Stephen Golant provides a number of reasons why that “right place” might be the longtime family home:

•The advantages of a familiar neighborhood: the individual knows the shops and services and can navigate the area well even after physical or cognitive decline.

•The advantages of a familiar home: spatial competence (finding your way when the power goes out, navigating steps out of familiarity)

•Preserving familiar relationships – friendships and service providers.

•The attachment to possessions and pets is not disrupted (e.g., vs. moving to no-pets home); the home not only contains memories of the past but also reminders of past successes.

•The home affirms one’s self-worth; one fears (whether rightly or wrongly) that others will consider the person a “retirement failure” upon moving.

•Maintaining privacy, vs. moving from a single-family home to an apartment, or to Assisted Living, shared housing, or living with family.

At the same time, there are many quite considerable costs incurred in Aging in Place, not just direct financial costs, for which we can argue about whether the government should shoulder these, but less tangible costs:

•Financial costs: the cost burden of maintaining large older home with yard vs. smaller but newer space with maintenance covered by association/landlord

•Physical costs: the steps/stairs and narrow doorways can make home a prison for the physically-impaired or place the individual at risk of falls.

•Social costs: the idealized neighborhood relationships might not be real, and turnover in the neighborhood may mean that there is more likelihood of social connection with the intentional social opportunities of a senior community.

•Health costs: isolation can mean lacking help for medical emergency – even to the point of dying unnoticed. More mundanely, homebound seniors have less ability to cook healthy food, travel to doctors, etc.

•Finally, there are particular challenges for those experiencing cognitive decline, especially when there is no family member to notice or when decline is hard-to-notice.

Golant doesn’t beat around the bush, but writes that

“Older adults are now bombarded with a singular and unrelenting message: They should cope with their age-related health problems and impairments in their familiar dwellings. . . . Older people cannot turn on a TV, search n the Internet, read books about old age, or pick up a newspaper without getting this persistent stay-at-home message” (p. 63).

In a somewhat older article, in 2009, William H. Thomas and Janice M. Blanchard offered a sharp critique of the Aging in Place model, in “Moving Beyond Place: Aging in Community.” They acknowledge the fear of nursing homes but write:

“The bitter truth is that an older person can succeed at remaining in her or his own home and still live a life as empty and difficult as that experienced by nursing home residents. Feeling compelled to stay in one’s home, no matter what, can result in dwindling choices and mounting levels of loneliness, helplessness, and boredom.”

This is a stark message. But here’s an even more discouraging problem: in my research on the issue, I encountered one repeated refrain. There is no solid scholarly research which asks the question: “which choice is the better one, in terms of future quality of life, to stay or to move?” It’s not an easy question, to be sure: simply looking at the quality of life of the elderly and comparing those who live in single-family homes vs. various kinds of “elder-friendly” housing would not adequately distinguish between those who moved due to some sort of health problem and those who moved with the aim of preventing future health problems, for example. But there’s a data source that scholars have mined creatively to answer all manner of questions about retirement and aging, the Health and Retirement Study, and economists and similar researchers have been very creative in identifying “quasi-experiments” to answer this sort of question.

Discouragingly, though, given the relentless policy advocacy of supports for “aging-in-place,” it seems rather likely that this advocacy has discouraged researchers from considering that question in their research, depriving us all of what would otherwise be rather important information.

 

Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “What Does Aging-In-Place Mean? It Depends On Whom You Ask”

Originally published at Forbes.com on June 5, 2022.

Americans, we’re told, want to “age in place,” as proven by repeated survey data.

And most of us probably think we know what it means — staying put in the home we raised our children in as we age: “the only way I’ll leave this house is feet first,” as my own father used to say.

But it turns out, it hasn’t always meant this, there is no single official definition, and not all experts even use what we might think is its straightforward meaning.

The CDC definition

At first glance, the term looks obvious: a google search turns up repeated references (for example, at the Rural Health Information Hub, Harvard Health Publishing, and the AARP) to a definition by the Centers for Disease Control:

“The ability to live in one’s own home and community safely, independently, and comfortably, regardless of age, income, or ability level.”

But it’s not that simple.

This definition was not a part of some sort of Aging-in-Place research project at the CDC. It does not come out of a larger discussion of the topic. Instead, that definition comes from a web page called Healthy Places Terminology, and, what’s more, the page itself is stated by the CDC to be inactive, part of the Healthy Community Design Initiative, “no longer a funded program.” In fact, the page was last reviewed on October 15, 2009, and, according to the Internet Archive/Wayback Machine, that page first appeared in 2004, but the Aging in Place definition was not added until the end of 2008, and a broader review of the Healthy Places initiate indicates that the project was concerned not with aging but with community design to encourage physical activity, for example, encouraging sidewalks so that it’s easier to walk to get to places.

And, in fact, if you think about it, this definition of “aging in place” doesn’t really make much sense: what defines being in your “own home” vs. some other living arrangement? If you move to an apartment or a retirement community or an assisted living facility, is your unit still your “own home”? And why does the definition state that “aging in place” is about living “safely, independently, and comfortably”? Don’t plenty of people “age in place,” that is, live in their longtime homes by themselves, without safety, independence, or comfort, when they are homebound and dependent on others?

The AARP

The AARP, on the other hand, has conducted a number of surveys in which a definition of Aging in Place is implied, if not directly stated: to stay in one’s current home forever, or for as long as possible. The first survey, “Beyond 50.05; A Report to the Nation Livable Communities: Creating Environments for Successful Aging,” dates to 2005 (seemingly; it is undated) based on 2004 survey data, and reports that 84% of those 50 and older, and 91% of those 65 – 74 and 95% of those older than 75, somewhat or strongly agree that they want “to stay in my current residence for as long as possible.” In December 2011, they sponsored a similar survey, “Aging in Place: A State Survey of Livability Policies and Practices,” which addressed a variety of issues related to housing and aging, similarly reports that “According to a 2010 AARP survey, nearly 90 percent of those over age 65 want to stay in their residence for as long as possible, and 80 percent believe their current residence is where they will always live.” In 2018, AARP updated their survey, reporting that 76% of those aged 50 and older and 86% of those 65 or older wanted to stay in their own home. And in another survey in 2021, they asked similar questions, though with fewer age bands, and less detail in reporting, stating again only that over 75% of those over age 50 wanted to stay in their current home.

In all these cases, the AARP makes it clear that to age in place is to remain in one’s home, with the title of the webpage featuring the latest data proclaiming, “Despite Pandemic, Percentage of Older Adults Who Want to Age in Place Stays Steady.” And in all these cases, the reports offer an explicit agenda: government agencies, nonprofits, and adults planning for future aging should all direct their efforts towards making this possible and providing more support for in-place agers.

A generation ago

It also turns out that, going back further (though early studies are hard to find), “aging in place” did not have this meaning at all. For example, in “Changing Concentrations of Older Americans,” an October 1978 article by Thomas O. Graff and Robert F. Wiseman at The Geographical Review, “aging-in-place” was used to describe not a housing decision but the process, at a broader, regional level, that caused a disproportionate share of older persons in certain regions of the country due to the out-migration of younger people for economic opportunity while their parents stayed put, as opposed to regions where the share of older adults was disproportionately large due to their in-migration.

And when Aging in Place was used specifically of housing choices, it did not have the positive framing of the CDC, but was considered to be a negative.

For example, a 1982 dissertation, “Aging in Place: An Investigation of the Housing Consumption and Residential Mobility of the Elderly,” by James David Reschovsky, considers the stability of the elderly, that is, their tendency not to move even when it would be beneficial for them, to be a problem that reduces welfare, or at least an economic puzzle that requires modeling and empirical explanation. Unlike current proposals in support of Aging in Place, Reschovsky’s policy proposals include assistance to elderly households to ease their search for more appropriate housing. Strikingly, he writes, “It may well be that what has been assumed to be a strong attachment for the current home by elderly homeowners is in fact more of a strong attachment to homeownership, and the pride and security attached to it,” and continues,

“The other area where individual counseling and assistance may be appropriate is in helping the elderly household decide whether a move is in its best interests. Many households may need some encouragement and support to make a move, particularly those mentally or physically frail” (p. 175 – 176).

The scholarly literature

Finally, in current academic journals, “aging in place” gets a pretty expansive re-definition.

For example, in “The quality of life of older people aging in place: a literature review,” in 2017, authors Patricia Vanleerberghe et al., write that

“Aging in place used to refer to individuals growing old in their own homes, but lately the idea has broadened to remaining in the current community and living in the residence of one’s choice. Indeed . . . the World Health Organization Centre for Health Development defines the concept broader as: ‘Meeting the desire and ability of people, through the provision of appropriate services and assistance, to remain living relatively independently in the community in his or her current home or an appropriate level of housing. Aging in place is designed to prevent or delay more traumatic moves to a dependent facility, such as a nursing home.’”

Indeed, the authors later claim that Aging in Place is so broad as to include assisted living facilities, which they identify as “a type of supportive senior housing.” As it turns out, these facilities are actually classified by the US federal government as a type of nursing home, or at any rate they have the same “long-term care facility” classification that meant that they had the same Covid lockdowns for their residents every bit as much as for actual nursing homes.

And what’s the point of this redefinition into meaninglessness?

My best guess is that Aging in Place has been determined by the AARP and other “aging experts” to be the right, acceptable way of living as one ages, and has become the unquestioned national or international policy objective. As a result, anyone who might wish to discuss alternatives that are not the very clear “stay in the family home” meaning, feels obliged to stretch the meaning of that term so that they can claim that their alternative is also a form of “aging in place.”

But this clever redefinition has not actually helped experts or government officials figure out the best sort of policies or programs to help the elderly as they begin to have physical or cognitive impairments. In fact (stay tuned . . . ), it’s probably made it harder because “aging in place” has become a party-line that one contradicts at one’s peril!

 

Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here

Jane the Actuary Retirement

Forbes post, “Washington State’s Celebrated Long Term Care Program Is Headed Towards Trouble”

Originally published at Forbes.com on January 11, 2022.

Nearly two years ago, social insurance advocates were celebrating the creation of a new long-term care program in the state of Washington. Here, for instance, is what The Nation wrote in May of 2019:

“The Long Term Care Trust Act, which passed the state legislature at the end of April and will be signed into law by Governor Jay Inslee on Monday, establishes the country’s first social-insurance program to pay for long-term care. All residents will pay 58 cents on every $100 of income into the state’s trust. After state residents have paid into the fund for ten years—three if they experience a catastrophic disabling event—they’ll be able to tap $100 a day up to a lifetime cap of $36,500 when they need help with daily activities such as eating, bathing, or dressing. . . .

“The architects of the legislation were trying to find ‘a number adequate enough to meet people’s needs and at the same time not be catastrophic if everybody [made claims] at the same time,’ [AARP vice president Elaine] Ryan explained. ‘To make it actuarially sound so people could be guaranteed a benefit.’

“The policy’s universal structure and funding is also significant. All working people will pay into the fund through a payroll tax and then be able to claim a benefit when they need it. The same structure has ‘stood the test of time’ with Social Security and Medicare, Ryan noted. Politically speaking, ‘it mattered a lot that it was set up as a social-insurance program,’ Caring Across Generations’ [Sarita] Gupta said.”

It sounded great — but too good to be true.

Now officials in Washington are recognizing there are problems with the plan.

In December, Gov. Jay Inslee announced a delay in the start of the payroll tax, so that the legislature could make changes when the new session convenes on January 10th, following a multitude of complaints about the program, in particular because workers who move out of state, or who were less than 10 years away from retirement, would be paying into the system without ever being able to benefit from it. The tax is now planned to begin in April, but if House Bill 1732 passes, the tax would be delayed until July 0f 2023. In addition, House Bill 1733 would allow people working in Washington but residing elsewhere, as well as temporary workers with nonimmigrant visas, and disabled veterans and spouses of active duty military members, to opt out. Neither of these bills, however, would deal with the issues posed by the eligibility requirements themselves.

But these eligibility requirements are in place for a reason, to reduce costs with lower numbers of recipients, and to build up reserves which are spent down as current workers ultimately retire. Here’s what the 2017 feasibility study itself reported:

“We estimate the Base Plan under Option 1 will require a 0.54% payroll surtax rate over the 75-year period 2020 through 2094. We estimate an ultimate tax rate of 0.94% to cover program costs after 2094 once the population receiving benefits has stabilized.” In other words, if all Washington residents were eligible regardless of age and contribution history, the cost of the program would double, because that’s what will ultimately happen when, 75 years into the future, all retirees have paid into the program. In practice, the actuaries consulted for this report anticipated that payroll taxes would be increased well before the 75 year period ends.

In addition, the $100 per day benefit is slated to increase by no more than the inflation rate, and possibly be reduced if it is deemed necessary for solvency purposes, according to the enabling legislation. And that $100 per day benefit is anticipated to be enough for the average individual receiving 96 hours of home care per month, based on Medicaid rates, for one year, according to the legislation’s findings.

One might argue that, however imperfect this legislation might be, its flaws can be remedied in the future. But the law is a mixture of characteristics of programs of social assistance and social insurance, to its detriment. A requirement to have paid into the system is characteristic of a social insurance program, and the 10 year contribution requirement is essentially the same as the eligibility requirement for Old Age benefits in Social Security. However, true social insurance programs pay out benefits to those eligible regardless of residence — again, once you’ve paid into Social Security long enough to have earned your benefit, you can collect regardless of where you live, even if you have moved abroad. In fact, even noncitizens who worked in the United States long enough to have accumulated sufficient Social Security credits, can receive benefits after having moved back to their home countries. What’s more, many social insurance systems provide some sort of refund mechanism for workers who do not accumulate enough contribution years to be eligible.

And this hybrid system will likely prove to be unsustainable politically. Even if ordinary Washingtonians are not well-versed in social insurance concepts and theories, it will not sit right with them that those who retire with 10 years of payroll taxes have “earned” their benefits but those with 9 years have not, and, likewise, that those who have “earned” benefits would lose those “earned” benefits merely by moving out of state. How precisely this will play out over the long term remains to be seen, but the new bills are not likely to be the end of the story.

In any case, these problems will not be easy to remedy.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “The ‘Loneliness Epidemic’ Among The Elderly May Not Be What It Seems”

Originally published at Forbes.com on July 15, 2021.

 

“Loneliness and social isolation in older adults are serious public health risks affecting a significant number of people in the United States and putting them at risk for dementia and other serious medical conditions.”

That’s from the CDC, in their informational content titled, “Loneliness and Social Isolation Linked to Serious Health Conditions.” The material continues by saying that social isolation increases risk of premature death from all causes, at a risk level “that may rival those of smoking, obesity, and physical inactivity,” and that it increases dementia risk by 50%. In addition, loneliness was associated with higher rates of depression, anxiety, and suicide, and a nearly 4 times increased risk of death among heart failure patients.

But what are loneliness and social isolation? The CDC says,

“Loneliness is the feeling of being alone, regardless of the amount of social contact. Social isolation is a lack of social connections. Social isolation can lead to loneliness in some people, while others can feel lonely without being socially isolated.”

And here is the surprise: social isolation and loneliness are, for the most part, two entirely separate sets of circumstances. According to a new study, “The epidemiology of social isolation and loneliness among older adults during the last years of life” (paywalled, abstract here), significant numbers of the elderly, and, specifically, those within 4 years of death, were lonely and/or socially isolated. (This data comes from an ongoing study of the elderly, the Health and Retirement Study, or HRS, and uses only the subgroup of study participants who completed a survey, then died within 4 years.) Among this subgroup, 18.9% met the definition of being socially isolated — few or no household or local contacts such as children nearby; having infrequent contact with children, family, or friends by phone, e-mail, or in-person visits; and low levels of community engagement such as church attendance or community volunteering. In addition, 17.8% identified themselves as frequently feeling lonely. For survey participants who died no more than 3 months after completing the survey, a greater percent were socially isolated — 27% — but the increase in those reporting loneliness (from 19% to 23%) did not pass statistical significance tests.

Yet there is no correlation between these two characteristics — feeling lonely subjectively and objectively lacking in connections. (Strictly speaking, the correlation is 0.11, on a scale where 0 means no relationship at all and 1 means a perfect direct connection between the two.) Put another way, only 5% of people experienced both loneliness and social isolation, or, to do the math, 72% of those who reported being lonely were “objectively” not socially isolated — they went to church, volunteered in the community, talked to their children, but felt lonely anyway. And 74% of those who met the criteria to be labelled “socially isolated” did not feel lonely as a result.

What’s more, in 2018, Cigna commissioned a study on loneliness in adults, generally speaking. And here’s another surprise: they found that loneliness declines in older generations. Specifically, Generation Z (ages 18 – 22) had the highest “loneliness index”, at 48.3, and the index declined with each successive generation, with the Greatest Generation (ages 72+) coming in at a loneliness rating of 38.6. (Yes, as much as Gen X is usually dropped off of surveys as of no interest to researchers and the media, in this case the so-called “Silent Generation” is lumped in with their older siblings.) What’s more, those who are retired had the lowest loneliness index — 41.2 vs. 43.7 for the employed, 44.9 for homemakers, 47.9 for college students, and 49.1 for the unemployed.

Now, it’s not easy to compare apples to apples, but the two studies refer to the same basic assessment, the UCLA Loneliness scale, though the HRS asks only three questions and the Cigna study the full 20. Does the HRS version drop questions that would add greater precision to their definition of loneliness? Does the full 20 question version give excess weight to the way younger adults may experience loneliness? Maybe — the full and abbreviated questions are here; the three-question version asks about feelings of lacking companionship, feeling left out, and feeling isolated from others but omits questions such as “my social relationships are superficial” and “my interests and ideas are not shared by those around me.”

So what do we do with this? Solutions (such as those offered in an article at the Columbia Mallman School of Public Health) focus on what it calls “a new social infrastructure with attention to designing solutions to address the social needs of seniors and the needs for intergenerational connection,” suggesting co-housing communities, and mentioning in particular an intergenerational tutoring program to “address one dimension of loneliness: the need to be a contributor to the public good and have a role in a community with meaning and purpose.” As a personal anecdote, for years I had an elderly neighbor, childless and dependent on neighbors to check in on her, but who rejected activities at the senior center because “it’s full of old people,” and it does seem to be an operating assumption by many that the elderly will make great companions for each other simply because of their age, as if that’s their sole defining character trait.

In any case, this new data suggests that the “fixes” for loneliness and for social isolation — at any age — are simply not the same set of actions, whether by the government, non-profits, or communities.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

 

Jane the Actuary Retirement

Forbes post, “Taking Labor Shortages Seriously – Economywide”

Originally published at Forbes.com on June 21, 2021.

 

“Emilio Enriquez has climbed from busser to line cook during his seven years working in restaurants, and he still dreams of becoming a chef.

“But he hasn’t worked during the COVID-19 pandemic and won’t look for a job until fall, once unemployment benefits no longer pay more than he would likely earn working and, he hopes, more people are vaccinated.

‘This is what I want to do in the long haul,’ said Enriquez, 25. ‘I’m just not ready to do that yet — especially since I’m making more at home.’”

These paragraphs — the opening paragraphs of a front page article in the Chicago Tribune earlier this month — are a rare instance of a journalist openly citing a nominally-”unemployed” individual choosing to stay out of the job hunt until after unemployment runs dry; far more often newspapers claim that these individuals just don’t exist, that the folks continuing to collect unemployment are truly unable to find work or truly prevented from working due to child care difficulties.

The remainder of the article discusses the labor shortage in the restaurant industry, from servers and bartenders to dishwashers and cooks. Industry experts reported that former employees had found work in other fields: “cannabis, distribution centers like Amazon and UPS, delivery services,” and the article interviewed half a dozen people, most of whom indicated plans to return to college in the fall instead of returning to a restaurant-industry job. Among the complaints cited by these workers, as well as by an advocacy group, One Fair Wage, were low pay, unpredictable and late hours, harassment from customers or co-workers, failure to follow safety requirements, and the health effects of exposure to sanitization chemicals.

What’s the fix? The industry representatives cited did not promote ending the bonus unemployment benefits. Instead,

“The biggest fix, [Hopleaf owner Michael] Roper said, would be “a rational immigration policy” that welcomes the people who do much of the hard labor in the United States. [Illinois Restaurant Association president Sam] Toia also championed immigration reform to boost the service industry, including an immigrant work visa program endorsed by the National Restaurant Association.”

But let’s set aside the issue of the $300 weekly unemployment bonus. Let’s take people at their word that this is a longer-term issue that has to do with the unattractiveness of restaurant work rather than government benefits, paid out on the premise that no work is available, leading people to turn down work. What’s to be done? It would seem obvious that the answer is simply for those complaining restaurants to boost their wages to a level that makes those jobs attractive despite the late hours. The reality is, of course, that to do so would require boosting menu prices, a change which results not only in fears of inflation, but (and this is less discussed) will sooner or later result in customers dining out less often or choosing less expensive restaurants. But that’s not necessarily objectively a bad thing; there is, after all, no need for any given frequency of restaurant dining for one’s well-being, and a change in pay scales would simply change norms and expectations about frequency.

Yet, at the same time, the industry’s proposed solution, increases in immigration, hardly seems like the ethical and responsible solution if, indeed, the worker shortage is due to poor pay and job conditions in an objective sense, rather than due to a spectacularly-booming economy in which workers have their pick of any number of jobs with “living wage” salaries and benefits. Why would it be appropriate for a restaurant to obtain a work visa with which to pay an immigrant low wages, if those wages would create a class of workers with living standards which we deem too low for Americans? Is it ever acceptable to create a set of jobs with low pay rates (that is, by using immigration increases to prevent wage increases which labor shortages would otherwise generate), with the rationalization that the families those workers are supporting live overseas in countries with lower costs of living?

Right now we’re discussing this with respect to restaurants, because that’s highly visible to those of us economically prosperous enough to visit restaurants and see the labor shortage play out: the host who says, despite clearly empty tables, that it’s a wait to be seated. But readers can likely guess where I’m going with this: there has been a longstanding labor shortage with respect to home care workers and caregivers at nursing homes and related facilities. Is the solution to boost wages? To hire workers from overseas? To do both — boost wages and hire immigrant workers?

Wage hikes, of course, increases costs both for the government and for families who pay their expenses on their own. Where there are fixed governmental budgets, that means more families on waiting lists. For families, that means more making-do, family members providing care, or going without or with less care, and, ultimately, means finally answering the question of whether the federal government should pay eldercare expenses for middle-class elders as well as for the poor, and whether children of those elders have obligations to support their parents (in Germany, for instance, those earning over EUR 100,000 have a legal obligation to pay their parents’ eldercare costs).

The latter — well, it’s a whole ‘nother kettle of fish. In 2019, the organization LeadingAge launched an initiative it called the IMAGINE Initiative, which proposed a set of immigration changes to boost the number of immigrants working in elder care. The proposal cites models overseas, such as 5 year temporary employment for foreign eldercare workers in Israel and a program giving eldercare workers permanent residency in Canada if they complete two years of live-in caregiving. For the United States, they suggest a six-year guest worker program specifically for elder caregivers, carve-outs in the EB-3 professional immigrant program for CNA and RN positions, creating a loophole in the R-1 program for religious workers to include non-US elder caregivers employed by religious organizations, the creation of an au-pair-equivalent program requiring eldercare rather than child care, allowing more temporary immigration in the NAFTA-replacement free trade agreement with Mexico, and directing an increased number of refugees towards eldercare employment.

These proposals bear no little resemblance to guest worker programs in oil-rich countries, in which foreign, temporary workers account for the largest part of the workforce and in which, except for professional workers, those workers much leave spouses and children behind in their home countries. We tend to think that in these countries, the prevalence of foreign workers is a marker of the spectacular wealth of those countries, but that’s not necessarily the case: in Saudia Arabia (or at least as of a decade ago), 90% of all private-sector workers were foreign workers, while at the same time 40% of all Saudi citizens lived in poverty.

Adding to these issues the overall uncertainty about the impact of future fertility rates and automation on the economy, and there simply is no easy solution here.

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.

Jane the Actuary Retirement

Forbes post, “Can The Dutch Example Help Us Improve Long-Term Care And Manage Its Costs? Maybe.”

Originally published at Forbes.com on September 1, 2020.

 

Yes, the Netherlands! Some time ago (almost exactly a year ago, in fact), I started researching what eldercare looks like in other countries, and had put this article together but waited to publish it until I could provide a series of such articles. At the time, my interest was in eldercare per se, and especially how it fits into broader issues of “Medicare for all”/universal health care. But, in light of Trump’s (barely thought through and soundly attacked) proposal to pay for Social Security through general tax revenues, I’m looking at this in a new light, because it really addresses bigger questions of what the right way is to fund social insurance programs in general.

The Netherlands, as it happens, ranks tops in long-term care provision among developed countries — if your metric is total spending level, where it ranks first at 3.7% of GDP or projected future spending, or total projected spending in 2070, where it comes out at 6% of GDP, second only to Norway (7.1%). But are they getting their money’s worth from that spending, and are they protecting elders from the impoverishing effects of out-of-pocket spending, and their children from the burdens of caregiving? Let’s do a deeper dive.

It is not hard to find articles praising the Dutch approach to eldercare. Its “Dementia Village” has received considerable press (for example, at The Atlantic in 2014) for its patient-friendly approach of creating a secure, Truman Show-style community in which residents can spend time at the town square or the grocery store as well as individual homes styled in the manner of their youth. Likewise, an expert on eldercare at Access Health International described her experiences in a visit to the country in glowing terms:

“I visited a number of different care homes, homecare organizations, academic institutions, and eHealth providers, as well as the University Medical Center in Groningen. Throughout my time in the Netherlands, I noticed that innovative groups all shared fundamental ideas upon which they centered the delivery of care. The organizations I visited focused on wellbeing, wellness, and lifestyle choices. They focused less on the medical aspects of chronic and long term care. These groups did not consider themselves to be part of the curative branch of the healthcare system. These healthcare professionals wanted to focus on patients’ individual capabilities, freedom, autonomy, and wellness.

“For example, the care homes wanted to provide a nice home environment, with home cooked meals, small groups, interior design choices, and a personalized care routine. The care homes focused on providing tasty food, the freedom to go to bed and wake up at will, and an exterior environment that feels just like the environment in any city neighborhood. The homecare organizations strove to provide assistance, but only when individuals could not manage on their own. The nurses look first at a person’s capability to care for him or herself. Next, the nurses look to the neighborhood and what help neighbors might provide. Then the nurses reach out to relatives to see if they can be of assistance. As a final step, the nurses provide care.”

But it’s not quite that simple.

Here’s a brief overview of the FICA-equivalent taxes in the Netherlands, courtesy Social Security Programs Throughout the World, at the Social Security website.

  • For old age, disability, and survivor’s benefits (American Social Security-equivalent), the Dutch contribute 20% of pay up to a ceiling of EUR 33,994 (about USD 37,700). Employers pay 6.27% of pay up to EUR 54,614 (USD 60,600).
  • For medical, the system is a hybrid one and workers purchase private insurance. Employers pay 6.90% of covered payroll (no ceiling), and the government subsidizes benefits.
  • And for long-term care, workers pay 9.65% of earnings up to EUR 33,994 (about USD 37,700).

 

(Yes, that ceiling puts the American debates about the unfairness of the Social Security ceiling into perspective.)

Are you ready to pay nearly 10% of your paycheck up to a ceiling, to fund long-term care?

World Bank consultant Laurie Joshua provides a more detailed review of the Dutch system in her 2017 paper “Aging and Long Term Care Systems: A Review of Finance and Governance Arrangements in Europe, North America and Asia-Pacific” (yes, that’s a mouthful, and a handy source for information on other countries, too). The first social insurance benefit for long-term care, the Exceptional Medical Expenses Act (or AWBZ in its Dutch initialism) was implemented in 1968 and, in 2014, 5% of Dutch people received benefits through the program. However, the cost of the system had escalated, which the government initially attempted to control with budget caps until a 1999 ruling prohibited these, and costs grew from EUR 15.9 billion in 2001 to EUR 27.8 in 2014, despite cost-control efforts such as increases in copays required from middle- and upper-income families and tightening of eligibility criteria.

In 2015, the government wholly reformed the system through the Long-term Care Act (WLZ in its Dutch initialism), with a new administrative structure, shifts in which levels of government pay for which services, a move to home support rather than nursing homes wherever possible, and general cuts/freezes in reimbursement rates. One consequence? The English-language site Dutch News reported in 2017 that

“At least 40% of Dutch nursing homes and home nursing organisations are making a loss and overall profitability across the healthcare sector has more than halved, according to accountancy group EY,”

as reimbursement rates drop and (since the less-frail elderly are more often being cared for at home) nursing home residents need more help.

Separately, municipalities are required to provide care services, either directly or through a “personal budget” as well as providing support and coordination.

Finally, elder care is not free of charge, though its rates are based on income and, at a maximum, still considerably lower than American private-pay nursing home or home care costs, at EUR 2,301.40 (USD 2,500) per month. As a result, copayments by families amount to 8.7% of total spending.

So, on the one hand, taxes are higher but the direct out-of-pocket costs of care in the Netherlands are substantially lower than in the United States, and its systematized provision of home care and the efforts put into home-like nursing homes are appealing. On the other hand, the jury is still out whether its 2015 reform has managed to control costs to ensure its programs are sustainable in the long run — and the very fact that this reform was needed confirms that an expansive government program isn’t as simple as its proponents would like it to be.

 

December 2024 Author’s note: the terms of my affiliation with Forbes enable me to republish materials on other sites, so I am updating my personal website by duplicating a selected portion of my Forbes writing here.