SUBMISSION TO THE SENATE INQUIRY INTO
SUPERANNUATION AND STANDARDS OF LIVING
DATED 3 MAY 2002
“NEW RESEARCH ON INCOME AND ASSETS OF THE ‘OLD’ OLD”
Professor John McCallum
Dean, College of Social and Health Sciences,
University of Western Sydney
Campbelltown NSW 2560
[[email protected]]
SUMMARY
 The connection between superannuation and other forms of retirement
income and living standards is a critical issue for an ageing society.
 We are currently looking in detail at the impacts of health and family
changes on the income and assets of the ‘old’ old in a study entitled
the Asset and Health Dynamics of the ‘Old’ Old (AHEAD).
 The study is a collaboration between USA, Japan and other countries
which will allow observation of effects of different policies.
 The asset and health dynamics of the aged provides a guide for the
current generation of elderly and it allows us to model potential
futures of the babyboom generation.
 More than half of our population 70+ received income from only the
aged pension and less than 10% received superannuation income,
while about 25% received some income from assets.
 Around 9 out of 10 were able to manage on their income but this often
was with resignation and ‘out of necessity’.
 Most older people have had major changes and crises in the last 10
years of their lives and these involve dissaving to manage the changes.
 We would support the immediate development of a national study, of
a similar type as AHEAD, to monitor the asset and health dynamics of
the babyboom generation over the next 10 years.
2
1.
POPULATION AGEING AND LIVING STANDARDS
Population ageing is the product of lower fertility which increases the relative number of
older to younger persons [slowed in Australia by high post World War II immigration
rates]; and lower mortality which increases gradually the number of years that an
individual expects to live beyond “normal” retirement age. Consequently the Australian
population 70+ is increasing much faster than younger groups both in numbers and
proportion of the population, and the group aged 80+ is increasing the fastest of all
(McCallum 1999). The rate of growth of the ‘old’ old population is double peaked at
2001-6 and 2026-31. So there is an immediate need for research on the behaviour of the
current ‘old’ old. This can be an initial guide to the larger issue of the greying of the
babyboom and our long-term interest in modelling the future implications.
The debate on the costs of ageing was discussed in the OECD Country Report on
Australia (1998), the Productivity Commission Conference ‘The Policy Implications of
the Ageing of Australia’s Population’ in March 1999 and in the Ensuring Quality of Later
Life (EQOLL) model (McCallum et al 1998) which projected ‘aged care services’
excluding health costs using age, sex and service specific historical data to create a model
for long-term care insurance. In 1996 the OECD modelled health costs for ageing in 20
countries. In Scenario One it was assumed that as people grew older they consumed more
health care so current per person health care expenditure was multiplied by the total
number of older people. In this model health care costs in Australia grew from 5.8
percent of GDP in 1995 to 7.6 percent in 2030, assuming health care cost grew at the
same rate as GDP. In Scenario Two costs of health care in the period prior to death were
modelled. Current expenditure per person was multiplied by the number of deaths in the
elderly population and health care costs were assumed to grow at the same rate as GDP.
Under this scenario costs rose to 6.2 percent of GDP in 2030. Australia and other
countries had higher projected costs under the first method compared to the second. In
the Dubbo longitudinal study, people 60+ who died over the first 5 years were 8 times
more expensive in health care use, mostly in the last 6 months of life, than those who
survived (McCallum and Geiselhart 1996). McCallum (2000) reviewed the ‘waxing and
waning’ debate about costs of ageing and concluded that, whatever side of the debate one
adopts, cost increases from ageing will need to be met from public and/or private sources.
This requires better analytical models to inform significant service reforms.
We identified a gap in Australian ageing research which we are now bridging. Various
Australian Bureau of Statistics (ABS) national surveys contain data about the resources
and health of Australia’s ‘old’ old notably the health, disability and household
expenditures series. Limited links are possible between these surveys but it is not possible
to link detailed economic status information with health and ability to function for the
‘old’ old. Moreover ABS surveys are cross-sectional rather than longitudinal and the
important questions require data from the same people who are followed over time.
There are a series of cross-sectional and longitudinal studies that have concentrated on
social and health aspects of older Australians but have limited economic information.
Three cross-sectional studies were completed in the early 1980s: Ageing and the Family
3
Project (Kendig 1986) - which became a longitudinal study when the survivors were
followed-up at 7 years (McCallum et al 1991); ACOTA/DCS Survey of Older People at
Home (ACOTA/DCS 1985); and the AIMA Community and Institutional Care for Aged
Migrants in Australia (AIMA 1986). The studies focused on social support, health status
and aged care services but not on assets and income. Similarly the Australian
Longitudinal Study (Andrews and Myers in press) is focused on health and social
transitions but limited in economic and asset areas, as is the aged cohort 70+ in Womens’
Health Australia’s Womens’ Longitudinal Study (Brown et al 1998) and the Victorian
Carers Program (Schofield et al 1998). The Dubbo Longitudinal Study in a population
born before 1930 (Simons, McCallum et al 1990 & 1991), continuing since 1988, has a
strong health and health service focus along with socio-demographics but as yet only
basic economic information. Australian surveys do not have detailed questions on income
and assets nor do they allow exact links of these to life and health transitions and
international comparisons of these relationships. We have added these items to the
existing Dubbo cohort (Simons, McCallum et al 1990, 1991) which from baseline
measurement has been matched to an existing Japanese survey.
2.
THE AHEAD-AUSTRALIA PROJECT: ASSET & HEALTH DYNAMICS
AMONG THE ‘OLD’ OLD
We are conducting a longitudinal study of the health and economic behaviour of very old
people (AHEAD) which will fill a gap in Australian and international research. The study
addresses important behavioural questions related to work, saving, and health for the
twenty-first century. We have added a longitudinal study of economic behaviour and
ageing to a successful cohort in the Dubbo community and compare results with
comparable studies in Japan and USA. This provides a database for modelling the costs
of support for the elderly through public programs such as Age Pensions, Medicare and
Pharmaceutical Benefits.
It has collected longitudinal data about resources of three types: economic, public
programs and families, and is constructing combined models of transitions in wealth,
resources and health status for the population 70+. Economic resources are those from
past and present employment, consumption and saving decisions of individuals and
households including housing equity, superannuation and consumer durables. Public
programs cover individual claims on age and veterans’ pensions, health and aged care
(particularly Medicare and Pharmaceutical Benefits funded services), and other
government programs. Family resources are the combined stocks of time, skills and
financial reserves held by the older person’s extended family. AHEAD has measured
current amounts and sources of income, assets, housing, and employment; use of health
and aged care services, out-of-pocket expenses, health and long-term care insurance; and
age pension, primary health care and other program use through linkage to administrative
data (subject to privacy constraints), from the Health Insurance Commission (HIC) and
Department of Health and Aged Care (DHAC), Department Family and Community
Services (DFaCS) and Department of Veterans’ Affairs (DVA).
AHEAD tests the general hypothesis that the course of age-related changes in health can
be offset by three broad types of "resources": economic resources which result from past
4
employment, consumption, and savings; claims on structured programs such as Age
Pensions, Medicare, and publicly funded aged care programs; and family resources of
time and money which can be made available to an older relative for caregiving or the
purchase of services. AHEAD provides data to address a broad range of scientific
questions focused on the interplay of resources and late life health transitions. These
include: the costs of illness borne by the family; differences in how resources are used to
offset cognitive, physical, and functional losses; the effectiveness of various care
arrangements in preserving function and delaying institutionalisation; the extent to which
transfers from family buffer the assets of older persons and slow transitions to late life
impoverishment; and the pattern of income flows and the extent and mechanisms for
dissaving and ‘spend down’.
3.
INTERNATIONAL SIGNIFICANCE & COLLABORATIONS
AHEAD-Australia is a partner in an international collaborative project. The Australian
study links with the national AHEAD-USA study now in its 7th wave and a Japanese
cohort study which paralleled the progress of the Dubbo Study, beginning in 1987 with
2200 people 60+, and in November 1999, the 5th Wave, added the AHEAD questions to
its ongoing cohort. The original US study is proceeding with record linkage and is now
covering all people born before 1953. [Note: Our study covers all people born before
1930.] It has had links to Social Security for earnings and benefits records for 5 years and
it has links to Medicare/Medicaid. It will also connect to records on Employer Health
Insurance and Pension Plans. Americans generally only have their health insurance
through their employer. They are considering looking at property tax records to get
values of properties. AHEAD-Australia has common questions with the US Health and
Retirement Study of persons born between 1931 and 1941 (the partner study to AHEAD)
which is also in progress in Japan, Holland and Mexico. New collaborative studies are
developing in the English Longitudinal Study on Ageing (ELSA), Study of Health, Aging
& Retirement Europe (SHARE). Full survey instruments, study methods and publications
are disseminated on a web site supported by the US National Institute on Aging (NIA):
http://www.umich.edu/~hrswww/index.html.
The US data indicate dissaving among ‘old’ old due to ‘spend down’ of assets to gain
means tested access to the US Medicaid program. A comparison with Australia may
indicate the degree of dissaving due to the different eligibility criteria for access to
medical and aged care services. Japanese elderly differ from Australians in having high
savings, high income relative to adult earnings, relatively high rates of employment, and
high rates of co-residence with family in 3 and 4 generation households. Japan is also
implementing public long-term care insurance. All these comparisons provide useful
information and models for Australian policy makers.
A major feature of this project is the extensive collaboration between the University of
Western Sydney, four major Universities (UNSW, ANU, Michigan and Tokyo) and four
public and private industry stakeholders. The strategic importance of the project to the
partners indicates they will benefit from early access to survey data i.e. it is not just an
academic exercise. Briefly, the linkage of survey data with their administrative datasets
will enhance the capabilities of the Department of Health and Aged care and the
5
Department of Family and Community Services to formulate effective policies for the
ageing Australian population; and Southern Cross Homes are committed to ensuring
their facilities and services are responsive to the needs and expectations of older
Australians.
4.
EXPECTED CONTRIBUTIONS
A much debated policy risk of the new millennium is that Australia’s economic and
social advancement will be slowed by the need to devote increased resources to maintain
the well being of the retired elderly. The post-war Baby Boom has provided transitory
relief from these trade-off decisions by increasing the share of workers in the population
until about 2010 when the first of these large cohorts turns 65; thereafter the pace of
population aging will accelerate, increasing the aggregate transfer burden on the working
age population. AHEAD addresses these macro-level policy questions by posing a large
number of micro-level scientific questions which allow social and health scientists to
formulate and test theories of determinants and consequences of individual and family
behaviour over the latter part of the life cycle. The broad scope of information collected
in AHEAD creates new opportunities for interdisciplinary and multi-disciplinary
frameworks to emerge as outcomes of the study. For one example, the most evocative
early finding from the US AHEAD study, is the strong positive correlation between
health and wealth (Smith, 1995, 1997) also evident in unpublished Dubbo data. Sorting
out the causal factors that underlie this correlation is one of the greatest challenges
Australian (Dixon 1999) and international researchers face, a task that has important
implications for policy and will require insights from economics, biomedical science,
psychology, sociology and demography (Smith and Kington, 1997).
No existing Australian study, public or private, provides the data necessary to know the
links between health, social relations and economic well-being. Consequently reforms in
health and nursing home funding have been developed in relative ignorance of behaviour
of older people. These practices are also of interest for older people themselves, service
providers, financial institutions and insurance companies as well as for governments.
AHEAD can contribute to economic and social advancement by addressing urgent issues
in aged care policy: how much of the responsibility to fund care of the aged falls to the
individual and how much is shared by society as a whole; what circumstances cause
people to move from private savings and assets to public dependency; the actual practice
of the principle of “mutual obligation” and its variation across countries; the financial
arrangements needed to cover the “baby boomer” ageing and intergenerational equity
(OECD 1998); the viability of options such as continuing care retirement communities;
and the potential of different policy mixes across the countries in the AHEAD study
(currently Australia, Japan, USA).
6
5.
THE INDICATIVE TIMETABLE
Period
Stage 1: Dec 2000 - Jan 2001
Stage 2: Jan - June 2001
Stage 3: June 2001 - Feb 2003
a. June - Nov 2001
b. Nov/Dec 2002
c. Jan 2002- Feb 2003
Stage 4: Dec 2002– May 2003
Stage 5: June – Dec 2003
6.
Project Activity
Questionnaire design, ethics approvals & staff recruitment & training
Conduct Wave 1 interviews in Dubbo – stages 1 & 2 completed on time
Complete out-of-town interviews
Preparation of data and first cut data analysis
Early results workshop in Perth
Dissemination: data reports, peer reviewed publications, website,
other outputs
Conduct interviews Wave 2
Preparation of data Wave 2
Wave 2 data analysis
PRELIMINARY REPORT ON WAVE 1 OF THE AHEAD STUDY
The survey work for Wave 1 of the AHEAD Australia Study has been completed. It was
conducted in two steps: the “in-Dubbo” surveys and the “out-of-Dubbo” surveys for
respondents who had moved.
Table 1: Survey and Follow-up Rates
Full questionnaire
Brief telephone questionnaire
Could not be located
Could not be contacted
Prior nursing home classification
Moved into nursing home
Refused to participate
Too sick to be interviewed
Moved out of Dubbo
Deceased
Total
“InDubbo”
surveys
“Out-ofDubbo”
surveys
1020 *
312
36
4
2
24
24
5
39
71
97 **
89
18
10
2
20
1,537
Total
21
1,087
401
54
14
4
44
54
5
39
92
257
1,794
* Of these, 921 gave full consent, 30 gave partial consent and 69 refused to give consent.
** Of these, 94 gave full consent, 1 gave partial consent and 2 refused to give consent.
The two year follow-up will begin in November 2002 to observe changes across the 2
year period.
7
Less than 10% received income from superannuation while a quarter had some asset
incomes. Generally the group have a high dependency on the age pension:
55% of people received money only from the age pension
6.3% of people received some income from current superannuation and
24.9% of people received some income from savings and assets.
2.2% of people received some income from their business(es)
Most people agree that they are able to manage on their current income.
Question: “I would like to ask you about managing your money.”
I can manage my money so I do
not have problems living day to
day
I can decide on the amount of
money I spend over and above
daily living expenses
I am financially prepared for
caring and medical expenses
Strongly agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Don’t know
TOTAL
Strongly agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Don’t know
TOTAL
Strongly agree
Agree
Neither agree or disagree
Disagree
Strongly disagree
Don’t Know
TOTAL
No.
234
774
4
22
3
3
1040
No.
233
751
12
32
4
8
1040
No.
201
737
27
56
5
14
1040
%
22.4
74.1
0.4
2.1
0.3
0.3
100
%
22.3
71.9
1.1
3.1
0.4
0.8
100
%
19.2
70.5
2.6
5.4
0.5
1.3
100
While nearly all people seem to be able to manage on the age pension we found that
people who have income other than the pension are more likely to score ‘strongly agree’
1/3 of all people with pension plus other income compared to just above 1/10 for people
who have only the pension income. However about 90% of both groups agree that they
are coping on their current income. This is quite often reported with resignation e.g. ‘you
just have to don’t you’. A few people did express considerable financial distress.
8
Question: “We’re interested in some of the things that may have happened to you since
1988. Have you …”
Question
Yes No
a. moved house?
Yes
No
Total
b. had a major health
change?
Yes
No
Total
c. had a spouse go into
care?
d. had a major family
crisis excluding
widowed?
e. moved to live with
our family?
f. had family move in
with you?
Yes
No
-8
Total
Yes
No
Total
Yes
No
Total
Yes
No
Total
N.
320
725
%
30.6
69.4
1045
No.
590
455
100
%
56.5
43.5
1045
No.
27
1017
1
1045
No.
318
727
1045
No.
24
1021
1045
No.
60
985
1045
100
%
2.6
97.3
0.1
100
%
30.4
69.6
100
%
100
%
5.7
94.3
100
Were you worse off
financially because of it?
N.
%
Yes
37
11.6
No
282
88.1
-7
1
0.3
Total
320
100
No.
%
Yes
79
13.4
No
510
86.4
-7
1
0.2
Total
590
100
No.
%
Yes
6
22.2
No
21
77.8
Total
see
Yes
No
Total
Yes
No
Total
27
below
100
No.
2
22
24
No.
8
52
60
%
8.3
91.7
100
%
13.3
86.7
100
Did you need to spend
savings or assets?
N.
%
Yes
51
15.9
No
268
83.8
-7
1
0.3
Total
320
100
No.
%
Yes
66
11.2
No
523
88.6
-7
1
0.2
Total
590
100
No.
%
Yes
4
14.8
No
23
85.2
Total
Yes
No
Total
Yes
No
Total
27
100
No.
2
22
24
No.
10
50
60
%
8.3
91.7
100
%
16.7
83.3
100
9
People spend down their assets to cope with crises in old age not just in maintain levels
of consumption. Multiple generations of family benefit from these expenditures not just
the older individuals and their spouses.
10
Question: “What do you think about children looking after their elderly parent/s?
Your answer does not need to reflect what would actually happen.”
Children should take care of their parent/s even if it is difficult for
the children
Children should take care of their parent/s if they are able to
The parent/s should take care of themselves
Don’t know
TOTAL
No.
24
%
2.3
289
659
71
1043
27.7
63.1
6.8
100
Question: “What would you prefer to happen if you were unable to care for yourself?
Your answer does not need to reflect what would actually happen.”
I would like to be taken care of by my family in my own home
I would like my family to care for me in their home
I would like to be taken care of at home with outside help for
housework and personal care services
I would like to be admitted to a hospital
I would like to reside in a nursing home/hostel
Don’t Know
Other
TOTAL
No.
38
16
617
%
3.6
1.5
59.0
2
288
62
20
1043
0.2
27.6
5.9
1.9
100
Our first comparison with the Japanese study will be to explore differences on these last
two questions.
11.
CONCLUSION
The early results from the AHEAD study indicate that it can provide essential data for the
current generations of people 70+ which will allow us to model future experiences for
babyboomers. However the new data from NATSEM (Harding et al 2001) indicates that
the assets of the babyboomers will be larger than those in current generations. Hence it
would be desirable to survey the babyboom generation as it passes through to retirement
ages. This would allow real time monitoring of changes in behaviour from the patterns
previously established in the AHEAD work. The experience of the USA studies of this
age cohort indicates that substantial resources are required to do the work. Hence there is
a need for both public and private funds from outside peer-reviewed granting bodies to
allow this work to proceed.
11
12.
REFERENCES
Andrews, G.R. & Myers,G.C.(in press). The Australian Longitudinal Study of Ageing: A
multidimensional prospective study of a 70 years & over population sample. Aging
Clinical & Experimental Research.
Australian Council on the Ageing & Department of Community Services Older People at
Home: Survey Results. 1985. Canberra: AGPS.
Australian Institute of Multicultural Affairs Community & Institutional Care for Aged
Migrants in Australia. 1986. Melbourne: AIMA.
Brown,W.J.,Bryson, L., Byles, J.E., Dobson, A.J., Lee, C., Mishra, G., & Schofield, M.
Women’s Health Australia: Recruitment for a National Longitudinal Cohort Study,
Women & Health, 1998, 28:23-40.
Dixon, J. A National R&D Collaboration on Health & Socio-Economic Status for
Australia. 1999. Canberra: NCEPH.
Harding, A., King, A., and Kelly, S. Trends in the Assets and Incomes of Older
Australians. Canberra: NATSEM November, 2001
Kendig, H.L, et al. Health Status of Older People: Data Report.. Melbourne: Victorian
Health Promotion Foundation, Lincoln Gerontology Centre, & National Ageing Research
Institute 1996.
___ (Ed) Ageing & Families. 1986. Sydney: Allen & Unwin.
McCallum J, Botsman P, Clarke A, Pearse W, and Keogh S, Ensuring Quality of Later
Life. Financing Aged Care Services in the Context of an Ageing Society. Campbelltown:
Centre for Health Outcomes and Innovations Research, South West Health Papers No. 2,
September 1998.
McCallum J. Australian Ageing: Policy Implications of Growing Old in a Young Society.
Journal of Sociology & Social Welfare, 1999, 26: 87-106.
___Health in an Ageing Society: Cost Rhetoric versus Service Reform, In A.L.Bloom
(ed) Health Sector Reform in Australia & New Zealand.. Melbourne: Oxford University
Press, 2000 pp 325-337.
___& Geiselhart, K. Australia’s New Aged. Issues for Young & Old. 1996. Sydney:
Allen & Unwin.
___ et al Ageing & Families 7 Years After: Data from a 7-Year Follow-up of Older
Australians. 1991.Canberra: A joint NCEPH/Lincoln Gerontology Centre Monograph.
OECD Economic Surveys: Australia. 1998. Paris: OECD.
12
Schofield H., et al Family Caregivers : Disability. Illness & Ageing 1998 Sydney: Allen
& Unwin.
Simons, L. McCallum. J, et al., The Dubbo Study of the Health of the Elderly:
Sociological & Cardiovascular Risk Factors at Entry, Australian & New Zealand Journal
of Medicine, 1991, 21: 701-709.
___ et al, The Dubbo Study: An Australian Prospective Study of the Health of the
Elderly. Australian & New Zealand Journal of Medicine, 1990, 20, 783-789.
Smith, J. P. Racial & Ethnic Differences in Wealth. Journal of Human Resources, 1995,
30(Suppl. 1995):S158-183.
___Wealth Inequality among Older Americans. The Journal of Gerontology Series
B,1997, 52B:74-81.
___& R. Kington.. Demographic & Economic Correlates of Health in Old Age.
Demography, 1997, 34(1):159-70.