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EXHIBIT A-1 THE CHALLENGE: AN ACCELERATING GROWTH IN LONG-TERM CARE NEEDS Wil Lybrand THE ELDERLY Even while the nation celebrates the fact that today more people than ever live to be 65 years of age (70 percent vs. 25 percent in 1900) and that those reaching that age will live longer (the death rate for the 65 and over population fell 27 percent between 1950 and 1980), other related facts are sobering and present a new challenge to our society. About 8 out of 10 of these older people eventually develop one or more chronic illnesses, such as heart or cerebro-vascular diseases, arthritis, rheumatism, osteoporosis, dementia, or depression, that limits to some extent their performance of everyday living activities. The limitations can be severe enough to make the individual dependent on others for assistance, intermittently or continuously, in various activities of daily living, including obtaining treatment for the chronic condition, over extended periods of time--in short, for long-term care. Today, about one out of every five persons in the 65 and over age group living at home or elsewhere in the community requires help from family members, friends or others for one or more activities of daily living, such as walking around inside their homes, bathing or using the bathroom, doing their laundry, preparing meals, doing light housework, going grocery shopping or to a health care facility. For those who are 65-74, about one of every nine requires such help; for the 75-84 age group, the proportion is about one of every four, and for those age 85 and over, one of every two. Generally, elderly people who need a great deal of help are more likely to be in nursing homes than living in the community. About 5 percent of the 65 and over age group are living in nursing homes; for the 85 and over age group, this rate increases to 20 percent. However, because these are percentages that reflect a point in time, they tend to obscure the fact that about one in five of those who survive to 65 years of age will spend some time in a nursing home before they die. These statistics regarding the numbers of elderly who are functionally dependent upon others in their everyday living assume a pervasive societal significance when viewed in the context of the very large increase in the absolute numbers of the elderly, and in the -29-

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proportion of the total population they represent, that the nation has been experiencing and will continue to experience over the next 15 years and beyond. Since 1940, the nation's elderly have more than tripled in number, from 9 million to 29 million in 1984, and from 7 percent of the total population to 12 percent. Looking ahead, while the total population will increase about 14 percent over the next 15 years to the year 2000, the total number of persons age 65 and over is expected to increase by 23 percent to about 36 million persons. Looking still further ahead to the year 2040, when the post World War II "baby boom" generations will have reached the age of 65, the total population is expected to increase by 41 percent, but the total number of elderly is expected to increase by 160 percent to over 67 million persons. Put another way, in 1980 about one out of 10 persons in the United States was 65 years of age or older; in 15 years, (the year 2000), that ratio will be about one in eight; by 2040, it will be about one in five. Even more dramatic is the expected rapid increase within the elderly population of those aged 85 and over who, as previously noted, are most functionally dependent and have the greatest needs for help and assistance in everyday living. At present, this sub-group of the elderly population are the highest users of nursing home care. Over the next 15 years, their numbers are expected to increase by more than 80 percent, from nearly 3 million today to over ~ million in the year 2000; by the year 2040, their numbers will have increased by about 150 percent to a total of about 7 million. Of this number, about 5 million or 72 percent will be female, including nearly 4 million non-married (widowed, divorced, never married) women. The potential implications of this demographic change in the age composition of the population, sometimes referred to as "geriatric imperative", on the aggregate needs of the elderly for long-term care are extensive. Assuming that current morbidity, disability, and functional dependence rates and patterns continue over the next 15 years, about 6.7 million of the non-institutionalized elderly in the year 2000 will require the help of others in one or more of their everyday living activities, an increase of about 50 percent over the number requiring such help in 1980. Assuming that current nursing home utilization rates among the elderly remain stable, about 2.2 to 2.3 million of the elderly can be expected to be in nursing homes in the year 2000, roughly a 77 percent increase over the number in nursing homes in 1980. About 4.4 million of the non-institutionalized dependent elderly in the year 2000 will be female, (65 percent of the total), three-fourths of whom will be unmarried. About 1.6 million elderly residents of nursing homes will be women, about three-fourths of the total, 9S percent of whom will be unmarried (versus 80 percent of the male residents). THE UNDER AGE 65 POPULATION The functionally dependent elderly are not the only group in the United States who need help and assistance in performing everyday -30-

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living activities. Persons under 65 who have experienced an early onset of a chronic disabling disease, are physically disabled from other causes such as accident injuries, who are chronically mentally ill, or who are developmentally disabled, including the mentally retarded also require help. National estimates of the numbers of persons in these groups is quite variable because of overlap (and thus double counting) in available national data bases and because much of the data are available only at the state level in various formats and have not been aggregated in a consistent, systematic way. However, even conservative estimates made on the basis of the incomplete data that are available indicate that there are at least as many, and probably more, functionally dependent persons in the population under the age of 65 as there are in the group 65 years and older. Moreover, from a societal standpoint, most of these persons need more help for a longer period of time, (some over their lifetimes) than those whose dependency begins after age-64. The Developmentally Disabled There were about 2.8 million developmentally disabled persons in 1980 (other estimates suggest a higher number) who by definition required the help and assistance of others in their everyday living activities, as well as specialized services related to their disabilities. About 250,000 lived in residential facilities specifically designated for the developmentally disabled; another 56,000 were in nursing homes specifically designated as intermediate care facilities for the mentally retarded, still another 20,000 were in foster care homes, and some 2,500 were in mental hospitals. Special education services were provided for those living in these residential facilities as well as for the 2.5 million residing in the community through "mainstream" programs in the public school system. The Chronically Mentally Ill Also in 1980, there were an estimated 1.7 million chronically mentally ill persons of all ages in the United States whose disability was considered severe enough to require the help of others in everyday living activities. About 900,000 were institutionalized: of these, 750,000 were living in nursing homes and 150,000 were inpatients in specialty psychiatric and mental health hospitals. It has been estimated that about 40 percent of the total nursing home population, including the 15 percent who are under the age of 65, have a chronic mental illness, often in combination with other chronic conditions. In addition to the estimated 800,000 severely disabled chronically mentally ill living in the community, another 700,000 were considered to be moderately disabled, many of whom were likely to require help in everyday living activities, at least episodically. About 6 percent of the chronically mentally ill population were estimated to be under the age of 21. There is some informed belief that the actual number of the -31-

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chronically mentally ill in the community was significantly larger than the above estimates. Other Disabled Persons Under Age 65 The number of other disabled persons under the age of 65 living in the community in 1980 who required the help of others in everyday living can be only very roughly approximated because of limitations of the available data. Sources of national data from which such estimates are derived are based on household samples which are known to have important limitations. They under-represent disabled people (of any age) living in board and care facilities and other group settings--with the number of such uncounted persons in 1977 estimated to have been about 900,000. Comparisons of relevant survey data about the over 65 population with data from local studies suggest that estimates of long-term care needs understate the real needs. Making allowances for growth between 1977 and 1980, and taking into account the number of the non-institutionalized functionally dependent elderly, and the developmentally disabled and chronically mentally ill previously estimated for 1980, a conservative estimate for "other disabled" functionally dependent adults (ages 21-64) in that year would be 1,000,000. Whether or not this reflects even a general order of magnitude is uncertain; there may have been 2 or more times that total. The presumption is that this population is largely composed of those who were physically disabled by early onset of a chronic disease or who were physically impaired from accidents or other causes. Future Needs of Under Age 65 Functionally Dependent Forecasts of the future needs of these three under age 65 groups for long-term care are not readily available. However, a number of indicators suggest the incidence of impairments in these three groups that are associated with disability and dependency may be increasing. For example, more genetically-impaired children and more low birth weight children, with an increasing proportion of teen-age mothers who are poor and socially disadvantaged, surviving due to improvements in neo-natal medical technology. An increasing proportion of chronic mental patients are young adults between ages 18 and 35 who have multiple problems, are non-compliant with medication protocols, use mental health services at a higher rate than older chronics, and are without resources and homeless. Morbidity rates (as well as mortality rates) for the 15 to 24 year age group also continue to rise, primarily as a result of automobile accidents and violence, which are frequently related to alcohol and drug abuse. All of the above conditions place the individuals involved at risk for long-term care. These and other indicators compellingly suggest that there may be a disproportionate increase in the long-term care needs of the population under age 65 in the years ahead. At the very least, without the introduction of highly effective preventive interventions, increases in -32-

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the prevalence of needs for long-term care in the three groups are likely to keep pace with the rate of growth of the under age 65 population, about 15 percent over the 1980-2000 time period. ESTIMATED OVERALL GROWTH - 1980 TO 2000 Combining estimates of the size of the long-term care population groups for the year 1980 and projecting their size in the year 2000 on the basis of total U. S. population growth over the same period, yields the growth estimates for the long-term care populations displayed in Table 1. The table also includes veterans of all ages who receive nursing home and domiciliary care from the Veterans Administration who are not included in the other groupings. The size estimates for the total and separate long-term care populations for the year 2000 should be interpreted as relatively crude indicators of the orders of magnitude involved. As indicated on the table, the numbers already are rounded to the nearest 50,000. Generally, the estimates for the non-institutionalized under age 65 populations are the "softest" and are most likely to be underestimates because of the conservative base numbers chosen for the year 1980 and the 15 percent growth estimate inputed in order to arrive at the year 2000 estimates. Other estimates for the 1980 base year put the non-institutionalized developmentally disabled well over 2.5 million. Likewise, there may have been as many as 2 million homeless chronically mentally ill persons not counted in any of the 1980 figures shown according to estimates from the Alcohol, Drug Abuse, and Mental Health Administration, although a lower estimate of around 1 million may be more reasonable. The uncertainty of the derived figure for the "Other Disabled Adults" in 1980 was discussed earlier. In addition, the projections to the year 2000 assume current disability and functional dependency rates and the categorization into non-institutionalized and institutionalized assume current service utilization patterns and rates. The order of magnitude of the projections thus would be sensitive to significant improvements in health status of the elderly, and an associated decline in the disability rate for that group, factors about which there is considerable disagreement among experts. A decline in institutional utilization rates also would have important implications for costs, but if we assume that the "de-institutionalized" would shift to the community, the overall order of magnitude of the total long-term care population would remain the samee With the above cautions and caveats in mind, and using 1980 as the base year, it can be seen that-- · The total long-term care population could increase by at least 4 million people, a 38 percent growth rate, to nearly 15 million in the year 2000. · Growth in the dependent elderly, estimated to be about 3.2 million to a total of 9 million, would account for 3/4 of the growth in the total long-term care population. -33-

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TABLE ~ Long-Term Care Population Estimates, 1980 and 2000 (Figures Rounded to Nearest 50,000) Total U.S. Population Under Age 65 Age 65 And Over Non- institutionalized Long-Term Care Populations Elderly - Age 65 and Over Developmentally Disabled Under Age 22 Chronically Mentally Ill Adults - Age 21 to 64 Other Disabled Adults - Age 21 to 64 Institutionalized Long-Term Care Populations Elderly Developmentally Disabled Chronically Mentally Ill Adults2 Other Disabled Adults2 Veterans (All Ages, Not Included Above) TOTAL LONG-TERM CARE POPULATION Number Percent of Total Population 1980 2000 % Increases . . 232, 650~000 273~950~000 +18% 206~800~000 237~700, 000 +15% 25~900~000 36, 250~000 +40% 4,450~000 6,700~000 +50% 2~500~000 800,000 ~ 4,950,000 +15%3 1 ~ DO 0 ? COO—l 8,750~000 11~650,000 +33% 1~300,00Q 2,300,000 +77% 300,000 250~000 ~ 750~000 +15%3 100,000 ~ an. onn - 150,000 +77%4 2,030,000 3,200,000 +58% 10,780,000 14,850,000 +38% 4.6% 5.4% 1Also includes some age 22 and over, but proportion is small compared to under age 22 population. 2Estimates of chronically mentally ill and other disabled adults age 65 and over included under Elderly. 3Assumes prevalence increases at rate of growth of under age 65 population: year 2000 population sizes were calculated on basis of that assumption Year 2000 prevalence increases for elderly, by contrast, were calculated from current age-specific morbidity and utilization data. 4Ass~mes prevalence increase the same as for the elderly, no new significant armed conflicts before year 2000. -34-

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· The estimated 75 percent growth in the institutionalized elderly of 1 million, to a total of 3.2 million in the year 2000, would account for about 72 percent of all persons institutionalized in that year. · Although the increase in the total long-term care population is driven largely by the increases in the elderly component, at least 40 percent of the long-term care population in the year 2000 could be under the age of 65. · The ratio of the total long-term care population to the total U. S. population could increase by 0.8 percent between 1980 and 2000; however, the projected decrease in the under age 20 component of the total U. S. population (not shown in table) suggests that the "total dependency" ratio in the nation--the ratio of those not working to those working--would be smaller in the year 2000 than it was in 1980 e Finally, although not displayed in the table, there are significant geographic differences among the states in the ongoing and projected future shifts in the size and age composition of these populations. There already was substantial interstate variation in 1980 in the proportions of elderly, as well as in the proportions of long-term care populations by state. The total picture of national long-term-care needs is incomplete without that perception of contours in geographic distribution. Meeting the accelerating growth of long-term care needs has been characterized as the single most important challenge to the nation's health and social services delivery system for the foreseeable future. -35-

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EXHIBIT A-2 HEALTH STATUS, LIFE EXPECTANCY AND LONG-TERM CARE UTILIZATION BY THE ELDERLY Dorothy P. Rice The aging of the population represents a most significant demographic change affecting American society. As more people live longer, chronic diseases, most commonly conditions of middle and old age, have emerged as major causes of disability and functional dependency requiring services that impact on many sectors of the economy: income security, health, housing, transportation, and recreation. The burden of chronic disease poses a great challenge for policymakers, for providers of long-term care services, including families and friends, and for the individual suffering from the disease. - ~ The changing structure of the population resulting from declines in mortality are first described In this paper as a basis for understanding the magnitude of the aging problem. The health of the elderly will be examined in terms of their health status, use of medical services, and costs of health care. Future morbidity patterns and the impact of the aging of the population on the health care system will be discussed. These projections raise many long-term care policy issues . The Changing Demographics The shift in the distribution of the population in the United States has occurred with considerable rapidity. In recent years, we have experienced a significant increase in both the number and the proportion of the population aged 65 and over. At the turn of the century there were only 3.1 million elderly people, 4eO percent of the total population (Table 1~. Forty years later the number of elderly tripled to 9 million and the proportion increased to 6.8 percent. By 1980, the elderly population almost tripled again to 25.5 million persons, representing 11.3 percent of the total population. The Census Bureau projects an increase to 35 million elderly persons by the year 2000, comprising 13.1 percent of the total population. Within the age group 65 and over, the number and proportion of very old have also increased rapidly. In 1900, less than 1 million persons were 75 years and over comprising 29 percent of the elderly; by 1980, -37-

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TABLE 1 Number and Distribution of the United States Population, All Ages and 65 Years and Over, 1900-2000. Population 65 Years and Over Population 65 to 74 75 to 84 85 Years Year All Ages Total Years Years and Over Number (in thousands) 1900 76,303 3,084 2,189 772 123 1910 91, 972 3,950 2,793 989 167 1920 105,711 4,933 3,464 1,259 210 1930 122,775 6,634 4,721 i,641 272 1940 131,669 9,019 6,375 2,278 365 1950 150,697 12,270 8,415 3,278 577 1960 179,323 16,560 10,997 4,633 929 1970 203,302 19,980 12,447 6,124 1,409 1980 226,505 25,544 I5, 578 7,727 2,240 Projections: 1990 249,731 31,799 18,054 10,284 3,461 2000 267,990 35,036 17,693 12,207 5,136 Percent Distribution 1900 100.0 4.0 2.9 1.0 0.2 1910 100.0 4.3 3.0 1.1 0.2 1920 100.0 4.7 3.3 1.2 0.2 1930 100.0 5.4 3.8 1.3 0.2 1940 100.0 6.8 4.8 1.7 0.3 1950 100.0 8.1 - 5.6 2.2 0.4 1960 100.0 9.2 6.1 2.6 0.5 1970 100.0 9.8 6.1 3.0 0.7 1980 100.0 11.3 6.9 3.4 1.0 Projections: 1990 100.0 12.7 7.2 4.1 1.4 2000 100.0 13.1 6.6 4.6 1.9 SOURCE: U.S. Bureau of the census. "America in Transition: An Aging Society." Current Population Reports, Series P-23, No. 128. Washington, DC: U.S. Government Printing Office, 1983. -38-

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there were almost 10 million persons in this age group, or 39 percent of the elderly. In the year 2000, the population aged 75 and over will number 17.3 million, almost half the total elderly population. The impact of these population changes as well as other factors has been a startling rise in the demand for health services at the same time the cost of medical care is increasing. In 1984, the United States spent more than 3 percent of its Gross National Product (GNP) on health services for the elderly. Mortality The rapid increase in the elderly population has been due to declining mortality rates across the entire life span and to changing fertility rates. When mortality rates began to decline rapidly early in the century, the decline was greatest at younger ages so that the proportion of babies surviving to adulthood increased. Based on mortality experience in 1900, an individual born in that year could expect to live an average of 47.3 years; by 1982 life expectancy reached 74.7 years (Table 2~. Declining death rates among the elderly, especially in recent years, have also contributed to the growth in the elderly population. The leading causes of death for the elderly are heart disease, cancer, stroke, influenza and pneumonia, and arteriosclerosis. Death rates for all these causes except cancer have been declining. The age-adjusted death rate for the population 65 years of age and over fell 27 percent from 1950 to 1979, and the decline for females was nearly twice as great as that for males. According to the National Center for Health Statistics, about half of the overall decline in mortality among the elderly during the period 1950-1979 was a result of the decline in heart disease mortality, the leading cause of death; another quarter is associated with the fall in death rates for stroke, the third leading cause of death. Cancer, the second leading cause, is the only major cause of death to have increased. A variety of factors are responsible for the substantial declines in mortality from heart disease and stroke during the past three decades. Contributing factors include improved medical services, advanced surgical and medical treatment of coronary heart disease, improved control of blood pressure, decreasing smoking, modified eating habits, increased exercise, and more healthy lifestyles in general. Improvements in mortality have been shared by males and females throughout the three decades since 1950, but women have experienced more rapid improvements for most leading causes of death. In 1950, the age-adjusted rate for males 65 and over was 34 percent higher than that for females; by 1979, the difference had increased to 69 percent. Health Status and Use of Medical Care Services The incidence of chronic illness increases with age and becomes a major cause of disability requiring medical care. Table 3 shows health status and utilization measures by age. All of the indices show a -39-

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significant increase with age. Thirty percent of the noninstitutional- ized elderly compared with 22 percent of those aged 45 to 64 report that their health is fair or poor compared with older people their age. Not surprisingly, the number suffering limitation of activity increase with age, rising from 7 percent of the total under 45 years to 24 percent at ages 45-64 years, and 46 percent at age 65 and over. Elderly people make more frequent visits to physicians than younger people. In 1981, noninstitutionalized elderly people had a physician contact (other than visits to hospital inpatients) on an average of 6.3 times a year, in contrast to an average of 5.1 times for persons aged 45-64. About 80 percent had a physician contact within the preceding year and 70 percent within 6 months. Only about 5 percent had not seen a physician for 5 or more years. Nine out of ten elderly people had a regular source of care and 8 out of ten saw a single doctor for their care. Elderly people are hospitalized more frequently and stay in the hospital longer than younger persons. There were more than 10 million aged discharges from non-federal short-stay hospitals in 1981 with a total of 109 million days of care. More than one-quarter (27 percent) of all people discharged were elderly and almost two-fifths (39 percent) of all days spent in hospitals were by elderly people. Only 4 percent of the civilian noninstitutionalized people were 75 years of age or older in 1981, yet they accounted for 13 percent of the discharges and 21 percent of all the days of care. According to the 1977 National Nursing Home Survey, about five percent of the elderly compared with 22 percent of the very old (85 years and over) are in nursing homes. Other chronically ill elderly persons are in psychiatric or other chronic disease hospitals, Veterans Administration hospitals, and other long-term care facilities. In general, elderly residents of nursing homes suffer from multiple chronic conditions and functional impairments. Almost two-thirds (63 percent) are senile, 36 percent have heart trouble, and 14 percent have diabetes. Although life expectancy for women is higher than-for men, relatively more elderly women are limited in activities of daily living, visit physicians more frequently, and are also predominant users of more days of hospital and nursing home care than men. Expenditures for Medical Care The aged represented only 11 percent of the population in 1980, but since they experienced high use of health care services, they accounted for 29 percent of expenditures for personal health care. Per capita spending was 3-1/2 times greater for elderly persons than for those under 65 years of age. The level of per capita spending is directly related to the prevalence of disease, the number of services used by each patient, and the average cost of each service. The very large differences in per capita spending between the elderly and younger persons are chiefly the result of the higher prevalence of heart disease among persons 65 years of age and over. Both younger -42-

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and elderly women used more medical services and incurred dispropor- tionately higher expenditures relative to their numbers than did men. Women represented 59 percent of the aged population and they incurred 63 percent of the expenditures. The economic burden imposed by a disease category varied with the age and sex of the population. Table 4 shows the expenditures in 1980 for leading medical conditions according to age and sex. For the elderly, diseases of the circulatory system were the leading cause of health care expenditures, accounting for about 30 percent of the tote] for older males and females and requiring $674 and $848 per capita, respectively. Also among the five most expensive conditions for both groups of elderly were diseases of the digestive system and mental disorders. Injury and poisoning and diseases of the musculoskeletal system and connective tissue completed the top five most expensive conditions for older females but ranked eighth and ninth for older males. Neoplasms were the second most expensive category among elderly males but ranked sixth for women 65 years of age and over. Similarly, diseases of the respiratory system were relatively important for older males (ranking fourth) but ranked ninth among females. Elderly people approaching death or institutionalization have very high expenditures for medical care. In 1978, the 1.3 million Medicare enrollees in their last year of life represented S.2 percent of all enrollees, but they accounted for 28.2 percent of program expenditures. Medicare users who died in 1978 were reimbursed an average of $4,909 for all covered services in their last year, about four times the amount reimbursed for services provided to survivors. Average reimbursement per decedent for hospital care was 7.3 times higher in the last year of life than for survivors; 3.9 times higher for physician and other medical services; and 12.7 times for nursing home care (Lubitz and Prihoda, 1983~. Future Morbidity Patterns There is considerable conjecture and controversy regarding future morbidity patterns. One theory holds that the improved changes in lifestyle will result in a reduction in the prevalence of morbidity from chronic disease and a compression of morbidity at the older ages. They foresee a continuing decline in premature death and emergence of a pattern of natural death at the end of a natural life span. Fries states that the "rectangularization of the survival curve may be followed by rectangularization of the morbidity curve and by compression of morbitlitv" (Fly ~c: 1 9Rn n ~ 1 151 rectangularization of ~ ___ of morbidity" (Fries, 1980, p. 135~. Kramer and Gruenberg, on the other hand, believe that chronic disease prevalence and disability will increase as life expectancy is increased leading to a "pandemic" of mental disorders and chronic diseases (Kramer, 1980; Gruenberg, 1977~. Manton elucidates the disagreement between the opposing viewpoints and points out that stability of morbidity and health status levels has characterized the aged population during the past decade (Manton, 1982~. He views human aging and mortality as complex phenomena and as dynamic -43-

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multidimensional processes in which chronic degenerative diseases play an essential role. His concept of "dynamic equilibrium" implies that the severity and rate of progression of chronic disease are directly related to mortality changes, so that with mortality reductions there is a corresponding reduction in the rate of progressive aging of the vital body organ system. He believes that the severity of chronic diseases will be reduced or the rate of progression slowed, resulting in reduced mortality rates and an increase in life expectancy. Schneider and Brady review the evidence presented by Fries and conclude "that the number of very old people is increasing rapidly, that the average period of diminished vigor will probably increase, that chronic diseases will probably occupy a larger proportion of our life span, and that the needs for medical care in later life are likely to increase substantially" (Schneider and Brady, 1983, p. 854~. It is, of course, quite possible that both phenomena will be taking place simultaneously: there may be an increasing number of individuals in quite good health nearly up to the point of death and an increasing number with prolonged severe functional limitation, with a decline in the duration of infirmity. The effect on the prevalence of morbidity would, of course, depend on the relative magnitude of the various changes. National Projections A decade-long trend in an accelerated downturn of the death rates from cardiovascular diseases became evident in 1978. Population projections and the resulting impact on health services utilization were first developed by Rice and others, based on the assumption of continued rapid reductions in mortality for the 25-year period of 1978-2003 (U.S. NCHS, 1983~. More recently, the Social Security Administration recognized the downturn in mortality rates by building into their population projections the assumption that mortality among the elderly would continue for the immediate future to decline at a relatively rapid rate. They assumed that between 1980 and 2005 for each cause of death group, the rates of decline that characterized the 1968 to 1978 period would gradually level off during the period 2005 to 2040. Rice and Feldman (1983) used the population projections made by the Social Security actuaries to show the impact of these demographic changes in the age structure of the population on health status, health services utilization, and expenditures for heath care to the year 2040 (Table 5~. The projections were based on current age-sex-specific rates of health status and utilization patterns, although it is expected that additional changes in levels of morbidity, therapies and technologies, availability, cost of care, and social and economic conditions also will contribute to altered patterns and levels of utilization of medical care services. Whatever else happens, however, the projected changes in the size and age distribution of the population would alone have a significant impact on utilization and consequently on expenditures. The implications of the aging of the -45-

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TABLE 5 Current and Projected Population, Limitations in ADL, Medical Care Utilization and Expenditures, United States, by Age, 1980-2040. Age 65 and Over Characteristics and Year . All Ages Under 65 Total 65-74 75-Over . Population (thousands): 1980 232,669 206,777 25,892 15,627 10,265 2000 273,949 237,697 36,252 IS,334 17,918 2020 306,931 254,278 52,653 30,093 22,560 2040 32B, 503 261,247 67,256 29,425 37,831 Non-institutionalized Persons with Limitations in Activities of Daily Living (thousands): 1980 3,142 1,362 1,780 648 1,132 2000 4,509 1,734 2,775 784 1,991 2020 - 5,952 1,998 3,954 1,309 2,645 2040 7,922 2,002 5,920 1,288 4,632 Physician Visits (millions): 1980 1,102 936 166 100 66 2000 1,314 1,083 321 116 115 2020 1,49g 1,164 335 191 144 2040 1,621 1,193 428 187 241 Days of Hospital Care (millions): 1980 274 169 105 49 56 2000 371 211 160 58 102 2020 459 234 225 95 130 2040 549 236 312 93 219 Nursing Home Residents (thousands): 1980 1,511 196 1~315 227 1,088 2000 2,542 226 2,316 265 2,051 2020 . 3,371 242 3,129 434 2,695 2040 5,227 248 4,979 425 4,554 Personal Health Expenditures (in constant 1980 billions of dollars): 19%0 $219.4 $154.9 $ 64.5 N.A. N.A. 2000 273.4 183.1 90.3 N.A. N.A. 2020 328.3 197.1 131.2 N.A. N.A. 2040 369.0 201.5 167.5 N.A. N.A. _ ,~ Source: Rice, D. P. and J. J. Feldman, "Living Longer in the United States; Demographic Changes and Health Needs of the Elderly." Milbank Memorial Fund Quarterly: Health and Society, Vol. 61, No. 3, S',mmer, 1983. -46-

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population on the demand for long-term care are significant. The following summarizes the results of these projections for the 60-year period 1980-2040: · The total population is projected to increase 42 percent, while the group aged 65 and over will increase 160 percent. · The total number of persons limited in activities of daily living is projected to more than double; the elderly with limitations will more than triple. · Physician visits will increase from 1.1 billion in 1980 to 1.6 billion in 2040. Only 6 percent of the 47 percent increase in physician visits will result form the aging of the population. · Total short stay hospital days will double with more than half this increase due to the aging of the population. Forty percent of the days of care in 2040 are projected for those aged 75 and over, compared with 20 percent in 1980. · The number of nursing home residents is projected to increase from 1.5 million to 5.2 million in 2040--a three and one-half-fold increase--to meet the needs of the aging population. o Using constant 1980 dollars, total personal health expenditures are projected to increase 68 percent; for the elderly an increase of 159 percent is projected. In 1980, ll percent of the population aged 65 and over consumed 29 percent of total health expenditures; by 2040 the elderly are projected to comprise 21 percent of the population, and almost half of the expenditures would be made in their behalf. Regional Projections The decline in mortality and changes in fertility have occurred throughout the United States, although the rates of change differ for various population groups. The Bureau of the Census recently published a set of projections to the year 2000 of the population of States (U.S. Bureau of the Census, 1983~. Table 6 shows these projections of the population by region and by age. For the United States, the population is projected to increase 20 percent in the 1980-1990 decade and 7 percent in the last decade of the century. The projected increase in the total population during the next two decades is 18 percent. There are, however, important regional variations in these population projections: · The West will be the fastest growing region in the country, increasing 45 percent from 1980-2000, more than twice the rate of increase for the nation. · The South is projected to be the second fastest growing region, increasing 31 percent from 1980 to 2000. · The rate of growth in the North Central region will slow to only 2.4 percent from 1980 to 1990 and then become negative for the 1990s. · The Northeast is projected to lose population in both decades. -47-

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o :3 o, · - c) p. m o o o C~ 1 o CO _ tD V E~ E~ C cn :~ C' _ :~ 0 o, ~ c: Z 0 0 0 0 V 0 ~: s a: 0 - o ~5 ~s o ~ U. z o E" o ~: :2 o E~ ~: ::) _^ . I0 m~ a'— 0 - ~ - ~ 0 =~= 0 0 ~ ~ ~ ~ o——0 0 O · · e e · ~ e ~ e · ~ ~ e ~ e ~ · e e e e e e e e 0 0 0 - \ ~ ~ 0 0 N ~ ~ 0 _ N N t~ O O ~J N t~ O C~J ~—— O O N ~ C~ _ O _ e' ~ _ O ~J ~ C~J _ O CU ~ C~J — ~ ~J ~ t~ — C~J _ _ _ _ _ _o O m - ~0 ~ O - 0 C~ ~ 0m—kD ~ O O - = O OC~ - 00 O · e · · · e · ~ · e e · e · e e e e · · e e · e e C~ O _m 0 C~J O =`D O ~ O C\1~) 0 CNJ O CXJ\O ~ ~ Ot - 0 ~—— O ~ ~ ~ — O —~ ~ ~ O ~ ~ ~ ~ O ~ eP ~ ~ O ~ ~ ~— _ _ _ _ _ _ _e. O ~ ~ ~ ~ O ~ ~ ~ ~ O—O U~ ~ O ~ ~ C~ ~ O CO \0 \0 0 O · · e · · · · · · · · e e · e e e e e · · · e e ~ 0 0~= m_ O _t~_c~ O t^~o a~_ Ot—~D C~— 0~10 0 0 a~ 0 c~ ~— — 0 ~ ~ ~ — 0 c~ ~—_ 0 c~ ~ _ _ 0 c~ ~—— _ _ _ — _ _ Io o C: ~C~ C~ o o vo o ~o o ~ o~ ~ 0 o O ~ ~ e ~ ~ O ~ ~ ~ O ~0 ~_= C~ _ -I o' ~ ~ o 0 ~ c) ~ o 0 ~ ~ - - o ~ =~m o · · · · · · · · · e e e ~ O ~ ~ = ~ _ ~ c~ _ Lrt ' r~ = _ tm t~ 1 _ _ _ 1 1 _ _ 1 1 ~ =~ eh— 0 ~ ~ · e · e ~ · · · · ~ _ ~o u~o ~o ~a~cn - _ ~ =m ePeP - kO O ~ 0 0 —~~o 0 ~ c~ _0—cu a~r~mr~— ~ ~o ~o _ _= a~— C~ O · e · e · · · · e e e e ~ · e · · e e e e e e e e a~J ~CxJ 0—0 ~t 0 ~J lm_ 0 ~—0 _ C~J\0 eP ~ CJ~ 0 ~J m0 _ I t~ — I I _ _ I I I I N _ ~ _ _ — eP— 1 1 O O C~ O - m a) 0- · e · e e — O \0 0 _ _ _ ~kD ~ a' ~ · e · e e e _ 0 0 1 1 1 — _ - m _ O ~ ~0 \0 C~ _ _ _ _ ~ \° ~ CS~ _ ~ ' _ _ ~ ~ ~ ~ a~ O ~U~ - C~J Lt~ tm _ _ _ ~ ~ m—~o ~ _ - =— - - C~' _ U~~ _ O CO ~ ~ ~ L~ CNJ—~ ln ^ _ _ _ _ \0 _ L~ C~=O - - - 1 _ 0 ~ O t0 _ 0 ~ \0 _ ~ 1 1 c~ ~ — - = CC o E~ —- m ~ - 0~_ - ~ C~ _ _ ~ _ ~ co m~ a~= C~ ~ ~— — - 0 ~ - r~ _ - _ =0 ~ _ ~ , ~ ~ O C~ 0 \0 d" _ ~J _ 0 a) O _ d. d. k0 1 1 Ct C: a) =._ ~: o 2 -48 - _ ~ t ~—. ~ ~ ~ e · e · · ~ · e e O ~ C~ ~ \0 0 ~ ~ ~ 1 _ _ _ _ _ ~ ~ ~0 0 kD _ ~C~ O ~ - 0 =~ - - ~ - ~ ~ a`= ~ - - ~ - c~ - cr`_ ~ ~o ~ - ~ - ~ - ~ ~ o - - ~ - ~ - ~o ~ - - _ e~ a) a~ ko ~ - - - - 0 r` - _ ~ - c~ - ~; L~ o ~ - d- - a' ~ ~ ct ~ ~ 1 1 c) ’: — - `D ~: o z m~c~ - = · e e e ~ ~ - C~ - = ~ C~ C~— 0 ~ ~ O ~ ~ ~ ~ 0 _ _ _ ~ _ 0 C ~C~ ~C~ _ m - ~ O _ ~ r~= ~ =0—~ 0 ~ - , ~ ~ ~ CD ~ \0 —C~ _ _ ~ 0 0= =m ~l~t - O O ~U~ - O C~ = ~ ~ cr—~ a ~ ~ ~ ^ ~ _. _ _ _ e~ 0 \0 _ C~ C~ tr\ ( ~ —~— — L~—C~J a` - 0 ~o e' ~ ~ ~ e~ _ ~ ~ _ _ r~ ~ ~ a: . —_ ~ _ U~ 0 0 ~0 ~ 0 _ 0 ~ O _ _ ~ ~ ~ a~ 0 0 C~ Q). ~ ~ O ~ U~ _ -5: _ t~ _ ~ ~ ~ ~ ~ ~ ~ ~ C "e _ I ~ ~ ~ ~ ~ ~o 0 ~ ~= ~ ~ =~U~ '_ ~ - = ~ — - = "C 3 0 O U: 3 ·- ~ ~ ~: U) ~ O C' ~ - t0 U) "C ~D ·- 0 0 c: ~ O U) 0 ~: O ~ aC: `: O 3 P4 - O C~ . ~ O aC Z C,., \,~ O 1 0 ~ 0 0 _ C) ~ ~U' o L. - ~n O 0 O O ~ : ~ · O 0 Pa 03 ~ I: f:1 ~ Q)l C ~ ~d 1 0 ~C C t_, - O o O ~ O Q) ~ ;) · C U] CC · a~ :D _ .. ~: cr: C tr:

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· The population groups aged 45-64 and 65 and over are projected to be the fastest growing segments of the population, each rising 37 percent in the two decades from 1980 to 2000. · The Northeast will continue to have the oldest age distribution with almost 15 percent of its population aged 65 and over. In 2000, the West will have the youngest age distribution of the four regions, with over 22 percent of its population below age 15, 45 percent between 15 and 44, 22 percent between 45 and 64, and 11 percent aged 65 and over. The differential rates of changes of the population will have a significant impact on planning for health and social services in the various regions of the country. Declining population may result in a surplus of resources; increasing population, especially of the elderly who require more services, may mean a shortage of resources, especially long-term care services. Table 7 shows the impact of the aging of the population from 1980 to 2000 on the health care systems of the four regions as summarized below: · The days of hospital care are projected to increase 28 percent. The projected increases vary significantly by region, from only 6 percent in the Northeast to 57 percent in the West, reflecting regional population shifts as well as the aging of the population. · The total number of physician visits is projected to increase 19 percent, with significant regional variations. A 5 percent decrease in physician visits is indicated for the Northeast. The West and South, however, with their large projected population growth, will see increases in physician visits of 46 and 33 percent, respectively. · The aging effect is much greater for nursing home care. The number of residents is projected to increase 69 percent, almost 4 times the growth in the population. In the Northeast and Northcentral regions, the number of nursing home residents will need to increase 44 percent. In the South and West, where the elderly will increase 60 percent, the number of nursing home residents will have to more than double to meet the needs of the projected elderly population. Conclusion The longer the period of projection, the more difficult are accurate forecasts of changes and the effect of changes in patterns of medical treatment, government regulations and legislation, inflation, insurance coverage, education, income, and other important parameters of health and health care. This discussion has purposely focused on the health status of the elderly and changes in the size and age of the population, although other forces will have an impact on health care use and expenditures. It is not known whether the momentum of sharp reductions in mortality levels experienced during the recent past will continue. However, because there is so much uncertainty over factors associated -49-

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1 Q e C: z z o ~ z o ~ E-^ — c: ~5 ~ E" :3 <: a: E~. e c C' - . - ~ ~: z o ~ E" e C) E" o G o S - 2 0 - 0 ’: _ :^ e c ~ ~ ~o ~ a' ~ ~ ~ · ~ e ~ ~ c~ c a' ~ ~ _ _ ~ 0 ~ _ ~ _ C~O "r Q u~ _ ~r Q ~ ~ _ ~ ’' C~ _ . . ~ ~ ~ ~ _ ~1 O ~—- 0 · · e ~ ~ ~r ’)—O ~r ~ 1 ~ _ C~ a, ~r U~—~ CU O ~ ~ 0 ~ ma' _ ~ ~ 0 - = ~ _ - ~ ~ ~ ~ ~ ~ ~ ~ _ _ _ C ~ OCO __ - ~ tl: · ~ ~ ~ e C, C P. C) a: 0 0 ~ CO L~ O ~ C~ O O O ~ ~J _ _ O ~ _ __ 0` U~ r~ ~ 0 O . . _ ~ d, ~D~ - ~ 512 _ OW _ _ ~ §1 _ ~ . ~ :: o~ ~ ~ a' 0 O U~ LO ~ ~ O ~_ t^~= a' _ . . . ~ ~ ~ U~ 0 ~ _ ~ ~ 0 ~ a. ~ C) oc ~ O ~ O O C~ u~ ~ ~ _ a, O U~ ~ ~ iD C~ ~ O ~ U~ _ ~ ~ ~ _ c: ~ 0~r~0 ~ ~ a0 · ~ ~ ~ ~ c, c _ a' ~: 0 0 0 =_ - _ ·D a~ ’)—~ 0 ~ ~ ~ ~ 0 ~ r~ ~ ~ a' ~ a: ~ L. - ~ ~ - 0 ~ ~~ _ ~ ~ ~ ~ . · · _ , . O O O ~ iD _ ~ ~ _ =0 U~ ~ ~ - - ~ _ ~C~ _ O O ~ ~ ~ ~ ~ ~J 0 ~ · ~ ~ ~ ~ · e ~ e ~ ~0 0 ~ _ - ’' =~d _ ~r ~ ~ ~ cr~ o·~ - _ _ =m mmo 0 ~——~ O ~D ~r ~r ~r 0ma'= ~ · · · · ~ ~r ~ ~ 0 ~ , I _ ~ ~ ~ ~ ~ ~ ~D _ ~ _ u~ a~ ~ _ ~ . 0~= 0 0 _ - - _ ~ _ _00 ~U~ m O ~r ~ ~ O ~ :~ - m ~ ~ ~ u~ - ~ ~r . . . . . ~ m~~o ~ - `o ’ = - cr~ ~ ~ _ ~ ~ ~ c~ _ C~_ ~~ u~ ~ ~ ~ ~ c~ ~ ~r ~ ~ · e · · · · · · ~ ~ ~O ~~ - - = C`~= ~ _ ~ ~ ^~ = - O - t— O ~ 0 0 ~ ~ tD ~ tD ~ 0 ~ ~ ~ —0 o— a~ 0 ~ ~ ~ a) a, 0 0 _ `0 r~ ~ ~ C~ ~ ~ ~ e~ O U~ ~ ~D ~ · · . · · — Q O o _ ~ v ~r _ - . t~, _ _ _ ~m ~U~ ~ ~ ~ 00 U~ ~ ’ ~ :~ ~ ~ ~r —0 ~r ~ _ r~ _ _ ~ ~ O · e ~ ~ ~ 2 ~~) ~r ~ ~ ~ O - ~ _ ~ ~ _ =` ~r—~ C _ . . . . . ~ ~ O ~ r~ O— ~ U~ ~ ~ ~ U~ ~ 0 ~u~a~cs~= mo c~+ mm m0 ~ O U~ ~= . . . . . . ., . _ . ’' — ~ ~ _ _ a' _ O ~ ~ _ _ _ ~ ~ ~ ~ 0 u~ O u~ ~ ~ ~ ~ a~ u~ r~ ~ ~ ~ ~ u~ · · · ~ · · · · · · · · · · · · ~ `00~= ~ 0 - _ ^ - 0 ~ _ ~ `0 ~ 0 0~ m ~ _ ~ ~ _- ~J 1 ~ ~ ~ ~ ~ O ~ ~ ~D ~ O _ _ O _ ~ c~d ~\ 0 ~ ~ ~ —~o ~ t—~o ~D ~ _ ’ ~ r~' —_ _ . ~ _ ~ . . . _ . O ~ ~ ~ ~ C ~r ~ 0 a~ ~ _ ~ - - .~c~ - t~ ~J ~ ~ ~ 0 ~l a' - ~ - ~ _ ~ O ~ ~ ~ ~ r~ 0 ~r ~ rm _ ~ _ _ · _ _ . . . _ - = ~ ~ ~ ~ _ O ~r~ _ _ ’) U~ ~— — U~ _ ~ ~ r~ ~ U~ iD _ . _ . . U~ ~ U~ ~ U~ ^_ _ _ ~ _ ~o O `0 _ ~ u~ ~ ~ ~ O ~ O C~ ~ O ~ r~ · e e e · e · · · · · · · · · · · · ~ ~ 0 C'Y 0 ~ —O ~ ~ ~ —~ O ~ ~D ——t^_ ~ ~ 1 _ 1 ~ 1 _ 1 ~ ^~ ~ - . O ~D ~D ~ ~ — rm ~ ~ O ~r~ 0 ~ ~ ~r~ · _ _ ~ _ ~ ~ ~ _ _ U~ ~ ~ \0 ~ `0 r~ ~ _ _ ~r C~ O ~ ~ cr~ ~r C~ ~ ~ ~r _ ~ 0 ~ _ · · _ _ _ ~D U~ ’ O Lr e~ _ . . . . . - `o _ 0 ~ ~ ~ O · - —L~ ~o ~r ~r u - - O _ D ~ U~ ~ ~ _ _ U~ ~ C ’: ~ ~D G ~ ~ C, _ . . _ . ~ t~ ~ ~:l ~ t 1 C o o - - - - C~ ·. CO ~: C) a: C m. -50 -

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with trends in major causes of death, no other effective substitute exists f or the proj eating the future health care needs and demands of the U.S. population. Continuing rapid growth in the number and proportion of aged in the population seems assured. Assuming that current utilization patterns will continue, the number of hospital days, nursing home residents, physician visits, and corresponding health expenditures will need to increase to meet the needs of the elderly. These projections indicate a need to provide alternatives to costly institutionalization and to maintain the independence of the elderly. The implications of the aging of the population will have a major impact on policy planning in the years ahead for U.S. social institutions, including the health care delivery system. -51-

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REFERENCES Fries, J.F. 1980. Aging, Natural Death, and the Compression of Morbidity. NEJM 303:3:130-135. Fries, J. F. and C. M. Crapo. 1981. Vitality and Aging: Implications of the Rectangular Curve. San Francisco, CA: W. H. Freeman & Company. Gruenberg, E. M. 1977. The Failures of Success. Milbank Memorial Fund Quarterly: Health and Society 55:3-24. Kramer, M. 1980. The Rising Pandemic of Mental Disorders and Associated Chronic Diseases and Disorders. Acta Psychiatrica Scandinavica, Supplement 285:62. In Epidemiologic Research as Basis for the Organization of Extramural Psychiatry. Lubitz, J. and R. Prihoda. 1983. Use and Costs of Medicare Services the Last Years of Life. Health United States. National Center for Health Statistics. DENS Pub. No. (PHS) 94-1232:141-149. Public Health Service. Washington, DC: U.S. Government Printing Office _. , 1n ~ -D — ~ December. Manton, K. C. 1982. Changing Concepts of Morbidity and Mortality in the Elderly Population. Milbank Memorial Fund Quarterly: Health and Society 60:2:183-244. Rice, D. P. and J. J. Feldman. 1983. Living Longer in the United States: Demographic Changes and Health Needs of the Elderly. Milbank Memorial Fund Quarterly: Health and Society 61:3:362-396. Schneider, E. L. and J. A. Brady. 1983. Aging, Natural Death, and the Compression of Morbidity: Another View. NEJM 309: 14:~54-856. U.S. Bureau of the Census. 1983. Provisional Projections of the Population of States by Age and Sex: 1980-2000. Series P-25: 937. Washington, DC: U.S. Government Printine Off; I.. P^~.1 ~~;~ Reports. ~ ,^~~ ~ _ ~ _ a_ . ~&, _ ~ ~_e arcs ~ ~ vet U.S. National Center for Health Statistics (NCHS). D. P. Rice, H. M. Rosenberg, L. R. Curtin and T. A. Hodgson. 1983. Changing Mortality Patterns, Health Services Utilization, and Health Care Expenditures: United States, 1978-2003. Vital and Health Statistics Series 3:23. DHHS Pub. No. (PHS) 83-1407. Washington, DC: U.S. Government Printing Office. -52-