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T he most recent national economic signals
appear to indicate a slowdown in the deepening
recession. This has led to hopeful optimism by
some economists that we are nearing a turning point;
economic growth may return as early as next year. As
a health economist with a passion for understanding the
connection between health and economic productivity, it
seems an appropriate time to review how the aging services
sector is faring, and whether we are positioning ourselves
wisely to benefi t from the recovery and to contribute to
increased economic growth.
As we know, policy and economics are closely linked.
In today’s economy, with the Obama administration facing
unprecedented budget deficits, it is more important than
ever to understand the economic undercurrents shaping
contemporary policy debates, and the evidence behind
these underlying economic assumptions.1 Yet too often
policy makers fall prey to negative economic myths and
stereotypes associated with aging. Therefore I want to
review four commonly held assumptions about economics
and aging that contrary to popular belief, are completely
false.
Assumption 1: Older Adults Are a Drain on the
Economy
The reality: The older (50+) population commands $2
trillion in consumer spending, an amount sure to increase
as the population grows older.2 This rising consumer
demand will stimulate many industries. These industries
include the high-tech industry, where breakthroughs in
products using technology useful to older adults, such as
robotics, will occur, as well as the more traditional “silver
industries” associated with older adult consumers such
as assisted living housing, pharmaceuticals, the banking
system, the travel industry, and long-term care insurance.
It is against this dynamic and productive economic
backdrop that we must develop a national strategic plan
to address and prevent the devastating consequences of
Alzheimer’s disease (AD). People with AD, unfortunately, are
indeed costly to the economy. Many will have used up their
savings. Unpaid caregivers (family, friends, and neighbors)
often will be forced to reduce or stop work to care for AD
patients. Already today, almost 10 million unpaid caregivers
provide over 8.5 billion hours of care, valued at over $94
billion.3 The economic costs of the loss of productive
labor from the market are enormous. As the population of
older adults doubles over the coming decades, continued
economic losses may become unsustainable without better
prevention or control of the progression of AD.
Assumption 2: Older Adults Are a Drain on the
Health Care System
The reality: The health care industry, one of the fastest
growing employment sectors in the country and fueled
by increasing demand associated with aging, will be a
powerful economic stimulus, particularly in large urban
centers, such as New York City.4 In the health care market,
as in all others, expenses to consumers provide income
to producers.5 Thus, increased expenses associated with
health care for a growing population of older adults lead
to job growth and income for health care workers. A
recent study by the Urban Institute finds health care to
be the leading employer in 20 major U.S. cities, and the
Department of Labor predicts tremendous job growth in
health care over the next several decades.6,7
But how high can health care expenditures grow
before we start depriving other sectors of the economy,
such as education or housing? The issue is not one of
absolute growth but of relative growth compared to the
economy as a whole. In fact, according to a recent study,
health care costs can increase 1% faster than real per capita
economic growth with no adverse consequences for the
next seven decades; that is, we would not have to decrease
spending in any other economic sector through 2075. A
2% differential still takes us through the next three decades
with no other spending decreases.8
Assumption 3: Preventive Medicine Is Not Cost
Effective After
Age Sixty-five
The reality: Health economists have shown strikingly
cost-effective results ever since preventive medicine for
older people first began to be systematically examined 20
years ago. A recent study of the value of disease prevention
among the elderly demonstrated prevention among
the elderly could be very cost effective. For instance,
hypertension control could reduce health spending by
$890 billion over the next 25 years, while adding 75
million life years; reducing obesity back to 1980s levels
would save more than $1 trillion.9 Yet, although we have
some very intriguing clues, we actually have very little
specific information about disease preventive or lifestyle
changes that might reduce the risk for AD. Further study
is desperately needed, including the association of AD
with obesity, diabetes and vascular disease.
Assumption 4: Increased Longevity Will Cause
Large Health and Social Costs Associated
with Degenerative Disease and Disability and
Economic Decline
The reality: There is a positive association between
increasing longevity and economic growth. A recent
study of developing countries calculated a ten-year gain
in life expectancy translated into nearly one additional
percentage point of annual income growth.10 This
favorable economic finding could apply to our own urban
neighborhoods as well. It is possible to speculate that
decreasing disparities in longevity across neighborhoods
would lead to increased urban prosperity.
Economic wealth is defined by more than market value
of course; it includes social value as well. A recent study
from the University of Chicago estimated that increased
longevity between 1970 and 2000 added more than $3
trillion per year to national wealth.11 This is an enormous
hidden increase in social value that is not considered by
standard market analyses.
Moreover, older people are staying healthy longer.
New data show old-age disability rates declined for all
socioeconomic groups over the past two decades.12 These
findings provide evidence in support of the “compression
of morbidity” hypothesis.13 This hypothesis suggests, as
people live longer, age-related morbidity begins later in
life; that is, morbidity is “compressed” into the later stages
of life.
Yet, without a cure for AD, the benefits of increased
longevity will be severely reduced. Today, the risk of
Alzheimer’s doubles every five years after age 65, with
40% of adults aged 85 years suffering from AD.14 If current trends are allowed to continue, by 2050 the U.S.
population with AD will triple, to over 13 million, with
serious consequences for the economic growth potential
associated with increased longevity.
Economic Growth: Bridging the Divide between
Public Health and Aging Services
We as a society have a lot to gain by supporting healthy
aging in our communities. With the fastest growing
segment of the population being seniors above the age
of 85, it is essential for our future economic growth to
increase federal support now of research to prevent AD
and federal, state, and local support for community based
services to help maintain our older seniors living at
home and in their neighborhoods. Public support of frail
seniors will have an economic “multiplier effect.” Today,
businesses lose over $60 billion annually because family
members have to reduce their hours or quit their jobs to
become caregivers. These business losses will soar without
public investment in aging research and services.
As the baby boom generation becomes the aging
boom generation, we have to counter prevailing economic
assumptions, and focus evidence-based policy on achieving
the economic potential of successful aging. The federal
stimulus package includes line item allocations for homeand
community-based services (HCBS) programs, but
the package does not contain additional money for Social
Services Block Grants or for low-income energy assistance,
helpful to seniors aging in place. The package does have
$100 million for senior nutrition programs and $500
million for federal health care workforce development
programs. In addition, the federal stimulus package adds
$87 billion to Medicaid funding for states. This is the
equivalent of $1 billion per quarter for New York State
Medicaid programs, helping to avoid cuts in chronic care
and long term care services. But we must consider whether
the complexity and lack of coordination of the current
12 Medicaid-funded long term care programs, combined
with the lack of an effective connection to the rest of the
health care system, is optimal. Efficient and eff ective aging
service systems, linked to public health systems, are not yet
on Obama’s navigational chart; a coherent aging services
policy has yet to emerge at the national level.
Unfortunately, at the local level, aging services are
suff ering devastating budget cuts. In the past year, the
NYC Department for the Aging (DFTA) endured $16.6
million in funding reductions. These include $888,000 for
caregiver support services and the complete elimination
of the Social Adult Day Program. As Bobbie Sackman,
Policy Director for the Council for Senior Center Services,
reports.15
“Looking ahead, Mayor Bloomberg’s Preliminary
Budget for FY2010, which begins on July 1st, would
reduce DFTA’s budget by another $21 million. It would
reduce funding for senior centers by another $5 million,
Case Management by $1.1 million and Home Delivered
Meals by $1.4 million. Elder Abuse Prevention services
would be eliminated entirely. $5.1 million of these cuts,
just announced last month, has yet to be identified.
Finally, the Mayor’s Preliminary Budget does not
include budgetary allocations for programs originally
funded by the City Council. This could mean another
$22.4 million in program cuts, including $4.5 million
and $3 million to address the rising costs of food and
transportation services, $2.4 million for the Geriatric
Mental Health program, $1.5 million for Healthy
Aging, $1 million for Naturally Occurring Retirement
Communities (NORCs) and other funding.
In total, these $60 million in cumulative budget
reductions represent more than one-third of DFTA’s total
City Tax Levy funding. Since more than 90% of DFTA’s
budget goes directly into contracts for senior centers,
case management, meals and other programs offered by
community-based agencies, these cuts have an immediate
and devastating impact on services provided to seniors.”
The best approach to economic recovery is to counter
the prevailing myths of the day, and focus research and
evidence-based policy on improving the health and social
outcomes of older adults and their families. Providers
of aging services have the potential to extend public
health initiatives to many different population groups of
community-based seniors and their families. Exploring
opportunities for collaborations with the public health
and long term care sectors, currently receiving stimulus
funding, may yield positive results. For example, social
adult day programs, senior centers, naturally occurring
retirement communities (NORCs) and caregiver respite
programs could increase the effectiveness of communitybased
public health programs in chronic disease prevention
and management through targeted outreach and inreach.
In conclusion, restoring vital community-based aging
services, as well as developing new models for coordinated
public health, long term care, and aging services programs,
are essential and compelling priorities we must address in
order to improve quality of life and to sustain economic
growth in our aging society.
References
1. Fahs MC, Viladrich A, Parikh N. Immigrants and Urban Aging: Towards A
Policy Framework, in Interdisciplinary Urban Health Research And Practice.
Eds. Freudenberg N, Klitzman S, Saegert S. In press. Jossey-Bass 2009.
2. Moody, H. R. Silver industries and the new aging enterprise. Generations,
28 (2004): 75–78.
3. Alzheimer’s Association. 2009 Alzheimer’s Disease Facts and Figures.
Alzheimer’s & Dementia, Volume 5, Issue
4. Lowenstein, R. The health sector’s role in New York’s regional economy.
Current Issues in Economics and Finance, 1 (1995): 1–6.
5. Reinhardt, U. E. Does the aging of the population really drive the
demand for health care? Health Aff, 22 (2003): 27–39.
6. Rogers, D., Toder, E., and Jones, L. Economic Consequences of an
Aging Population (Occasional paper no. 6. The Retirement Project).
Washington, D.C.: The Urban Institute, 2000.
7. U.S. Department of Labor, Bureau of Labor Statistics (BLS). Tomorrow’s
jobs. Available at http://www.bls.gov/oco/oco2003.htm. 2007.
8. Chernew, M. E., Hirth, R. A., and Cutler, D. M. Increased spending
on health care: How much can the United States afford? Health Aff, 22
(2003): 15–25.
9. Goldman, D. P., Cutler, D. M., Shang, B., and Joyce, G. F. The value
of elderly disease prevention. Forum Health Econ Policy 9 (Biomedical
Research and the Economy), Article 1. Available at http://www. bepress.com/fhep/biomedical_research/1. Published 2006. Accessed
June 23, 2008.
10. Bloom, D. E., and Canning, D. The health and wealth of nations. Science,
287 (2000): 1207–1209.
11. Murphy, K. M, and Topel, R. H. The value of health and longevity. J
Polit Econ, 114 (2006): 871–904.
12. Schoni, R. F., Freedman, V. A., and Martin, L. G. Why is late-life disability
declining? Milbank Q, 86 (2008): 47–89.
13. Manton, K. G., Stallard, E., and Corder, L. Changes in morbidity and
chronic disability in the U.S. elderly population: Evidence from the
1982, 1984, and 1989 National Long Term Care Surveys. J Gerontol B
Psychol Sci Soc Sci, 50 (1995): S194–204.
14. Hebert LE; Scherr PA; Bienias JL; Bennett DA; Evans DA. Alzheimer
Disease in the US Population: Prevalence Estimates Using the 2000
Census. Arch Neurol. 2003;60:1119-1122.
15. Sackman, B. A Graying NYC Threatened by Cuts and Consolidations.
New York Nonprofit Press. April 28, 2009.
 Marianne (Mimi ) C. Fahs, PhD, MPH, is the Rose
Dobrof Co-Director and Research Director of the Brookdale
Center for Healthy Aging and Longevity of Hunter
College and Professor of Urban Public Health at Hunter
College. She has over 25 years experience in health
services research, health economics, and policy analysis,
focusing on older adults and vulnerable populations.
Dr. Fahs pioneered the first cost-effectiveness analysis
of a preventive screening program among older women, contributing to
Congressional passage of Medicare’s inaugural preventive screening
benefit for cervical cancer. Dr. Fahs has an established national reputation,
and has served on several national advisory committees, including
the National Advisory Panel on Payment for Preventive Health Services
for the Elderly under Medicare for the Office of Technology Assessment,
United States Congress. Dr. Fahs holds joint appointments as Professor of
Economics and Professor of Public Health with the doctoral faculty of the
Graduate Center of the City University of New York.
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