How will we pay for pensions and health care?

Global ratings agency, Standard & Poor’s (S&P), has joined the chorus of concern about how the looming age wave will affect governments that must pay for escalating entitlement programs, The Wall Street Journal reports.

“Government debts will surge in coming decades if action isn’t taken quickly to cut the cost of paying pensions and providing health care to ageing populations,” the report found.

If governments don’t cut age-related spending, S&P said, the size of the state relative to the economy will jump and credit ratings will fall, with developed economies suffering the largest downgrades.

However, many European nations that have generous state pension systems and will have older populations would be in a much worse position. In the United States (US), government debt would rise to 415% of GDP, while Japan’s debt would rise to 753.1% of GDP, by far the highest figure for the 49 economies covered said the report.

The Wall Street Journal also reports that people in the US with long-term care insurance policies are getting hit with a new round of steep premium increases.

Insurers have attributed this to “policyholders living longer, generating higher claims and canceling fewer policies than they had projected.”

Companies have applied for rate increases ranging from 10 – 40%, unaffordable for some of the 8 million Americans who own a long-term care policy.

Some states protect policyholders who have experienced large rate hikes to “stop paying premiums altogether, while retaining coverage equal to the premiums they have paid already”. 

Other US research suggests that loss of employment may have significant negative health consequences for older workers. As mandatory retirement ages are eased and the labour force grows older in Australia as well as worldwide, the research indicates that older men and women will be exposed to the stresses of downsizing, demotion, and other workplace shocks that younger people may be more readily able to absorb.

The Journals of Gerontology Series B: Psychological and Social Sciences has reported that a team of researchers found that job insecurity increased the chance of harmful effects for a sample of older workers in Illinois.

Over time, men reacted with greater physical symptoms, while changes in psychological health were more prominent in women.

“Older adults in the United States are living longer and working harder,” said lead author Ariel Kalil, a Professor at the University of Chicago.

“Increased exposure to the labour market brings increased exposure to employment challenges.”

The new findings are based on a study of approximately 200 residents of Cook County aged 50 to 67.

The participants were considered to have experienced job insecurity if they reported that they were disciplined or demoted at work or if their employer downsized or reorganised. Job insecurity was not associated with health outcomes for all individuals uniformly.