The Future of Aging: Social Consequences of the Biomedical Revolution
Chairman - Eli Lilly and Company
March 2, 2004
Remarks to Town Hall Los Angeles — Los Angeles, California
Thank you. I'm delighted to be here. When I consider some of the renowned figures who have appeared here over the years, I feel honored to be invited. I'm also very grateful to all of you for turning out, despite the distraction of the "Super Tuesday" primary. Some might wonder about my sense of timing, but, as I see it, today's big event provides a perfect context for our discussion.
First, it underscores just how important Town Hall Los Angeles is. To make good choices in our democracy, we need good information. This forum, and a handful like it in other parts of the country, provides us with the opportunity to hear different points of view on vital topics -- unedited and unmediated. This is one of the very few places where new ideas can be presented for a full, fair hearing.
More particularly, this primary provides a good backdrop for the subject I want to explore today. It's very clear that one of the "hot buttons" in the upcoming election will be health care, especially how to manage the cost of it and how to assure access to it. There's a great deal of political voltage in these questions, and, as you probably know, the pharmaceutical industry is the lightening rod for much of that electricity and very definitely feeling the heat it has generated.
So you might assume that I'm here today to try to cool things down and defend the industry against its many critics. Well, yes and no.
I do want to change the way people think about health care in general and my industry in particular, but not by jumping into the thicket of specific claims and counter-claims. I'll be happy to do that in the question period, if you wish. But in my remarks, I want to take you in the opposite direction -- away from the thicket of health care and back out to the broader landscape of social change.
I believe it's vitally important to set all of these issues we're now wrestling with in the context of a far bigger issue looming just over the horizon. What I'll focus on is the huge demographic event -- the phenomenon that some have called the "age wave"-- that is about to break over American society.
In the United States a hundred years ago, about 4 percent of the population was over 65. By 1950, it was 8 percent. Today it is a little under 13 percent. By 2030, it will likely exceed 20 percent.
This is a change that will change everything. Dealing with it, in one form or another, will very likely be the dominant public issue for the first half of this century.
If we are to make sound, informed policy choices, we need to understand the world we are heading into. We need to realize that the future of America is inextricably bound up with the future of aging.
Let’s start with the factors driving the population shift. Demographers point to three great forces combining to create this age wave.
The first factor is obviously longevity -- people are simply living longer. Americans have added 28 years to the average life expectancy over the last century. With enormous improvements in our standard of living, our public health infrastructure, and our medical technology, we have managed to sharply reduce the high incidence of premature death that human beings have suffered throughout history. More than two-fifths of the over-65 cohort is already over 75. The 2000 census shows that the population segment known as the "oldest old," those over 85, is the fastest growing of all.
The second force is the approaching retirement of the baby boomers. The oldest of this generation of 76 million will reach 65 in just seven years. By sheer mass, the boomers have defined the center of gravity in American life from childhood on. As their numbers are added to the long-lived seniors ahead of them, markets, media and politics will have to focus on the elderly.
The third force is the countertrend, the "baby bust" that followed the boomers. If the boomers create a peak to the age wave, the next generation accentuates the trough. Beginning in the 1970s, fertility rates in America have declined to historic lows. For three decades, they have been less than two-point-one children per woman of childbearing age, which means that, as a nation, we are not replacing ourselves.
When you add these forces together and project them into the future, you see an astonishing effect that amounts to an inversion of the normal "pyramid of age."
For most of our lives, and indeed for all of recorded history, that array has looked like the letter "A," with the greatest number of people, the very young, at the bottom, tapering to a narrow point of the very old at the top.
In recent years, that "A" has begun to morph into something like an "O" as the baby boomers have reached middle age.
Over the next 30 years, that shape will morph further, toward something like the letter "V," -- turning the pyramid upside down.
Nothing like this has ever happened in recorded history.
But what are the implications? What does the age wave really mean for America? Is it to be feared or welcomed?
Public attitudes seem to be mixed. The emerging story on longevity translates into a new sense of entitlement at the individual level. People clearly want to live longer, and now they expect to.
But in media accounts and political speeches, the focus seems to be on the most worrisome entailments of the age shift, with an emphasis on economic concerns.
The conventional perception is that a big increase in the number of elderly means a big increase in costs to society. Older people, we all know, have a greater burden of illness and disability. So health care costs are bound to shoot up. And extended lives require extended pensions, which surely means greater Social Security expenditures. The big question is "who is going to pay for this and how?"
The answer that has worked for so long -- taxing current workers to support current retirees won’t work much longer. That’s the significance of the baby bust.
When Social Security began in 1935, there were 40 people of working age to support each retiree. By 1950, the ratio was 17-to-1. Today, it is about 4-to-1. By 2020, it will be 3-to-1. By 2030, there will be roughly two workers to cover the benefits of each retiree.
It's safe to conclude that the intergenerational "chain letter" is about to be, if not broken, then drastically revised.
In the meantime, the main course of action that many public officials seem to have embraced is an effort to contain the costs of the benefits provided.
Health care, and especially the pharmaceutical industry, are right in the cross hairs of this effort. From this vantage point, new medical technology is seen as more of a problem than a solution. The argument is that high-tech therapies come with higher price tags and, because they work better, expand utilization. Some health economists have insisted that, given that we cannot slow down the increase in the number of elderly, our only option is to slow down the flow of expensive new technology to assist them.
No one acknowledges that, in fact, this is a way to slow down the increase in the number of elderly.
In any case, health care is merely the "target of opportunity" for the general mindset. The dominant assumption in policy circles is that the age shift is going to bring massive economic challenges. And rigorous cost control is going to be the primary path to solutions.
I wouldn’t say this conclusion is incorrect so much as it is incomplete. When several key details are added to the picture, I think the future looks much brighter than the conventional view.
What the conventional view misses, I think, is an adequate understanding of the role of biomedical innovation in the future, and, for that matter, in the present day. The pessimists don’t see how technology is changing the aging process.
The key fact missing from the conventional view is the dramatic decline of disability among those over 65.
One study estimates that disability among the elderly declined over the twentieth century at an average rate of roughly half a percent per year. Data available since the early '80s show conclusively that the trend is accelerating significantly. Disability dropped 1.6 percent annually from 1989 through 1994, and 2.6 percent per year from 1994 through 1999. At this point, fewer than one in five Americans over 65 suffer from a disabling condition.
Some gerontologists summarize such findings by saying that we’ve added 10 years to what we might call our "health span," that is, years of life without a disabling condition.
By the way, this effect can’t be explained by pointing to water treatment plants or any other part of our basic public health infrastructure. Healthier lifestyle choices are part of the story, but primarily this is medicine at work.
Moreover, it’s clear that seniors are using this windfall of vitality in ways that would have amazed their own parents.
Retirees today are not buying rocking chairs. They are buying sea kayaks and tandem bikes. They are taking up distance running in their 60s, learning to tap dance in their 70s, signing up for walking tours at 80.
Their improved vitality is mental as well as physical. Far from shunning the new information technologies, seniors have rapidly learned to use the new tools of connectivity to fight isolation and loneliness.
Across the nation, colleges report steadily rising enrollments of the elderly in a broad range of courses. Learning for learning’s sake seems to be a rapidly growing pastime among retirees
What we’re witnessing is the emergence of a new life stage -- growing between what we have always called "middle age," say age 50, and what we think of as truly "old age," a boundary which has now moved out to 75 or 80. It’s as if we’ve opened the circle of life and inserted a new wedge in it. One gerontologist suggests that the people entering this new age will not turn into their grandparents. Instead, they are turning out to be simply more experienced versions of themselves in middle age.
The conventional view of our future society misses this entirely. It still expects the majority of the elderly to fit the traditional stereotype of older people - failing physically, fading mentally, stuck in the past, and fearful of the future. In short, living lives ruled by entropy.
In fact, all evidence suggests that the new senior citizen will be a person characterized by energy.
And why does this matter so much?
Because that energy, that larger health span created by decades of medical innovation, may well turn out to be the most precious natural resource we have. The contributions of these "super seniors" may indeed make the difference between a future of economic stagnation and decline and one of continued vitality and economic growth.
Consider this: there are many components to economic growth, but one that is absolutely essential is a growing workforce.
Now, the demographic facts of live we've just reviewed suggest that the labor pool in the U.S. is not going to grow. It's going to shrink. That, in turn, suggests that at some point within the next two decapdes, our economy will bump up against a ceiling on workforce expansion, cutting off further growh.
This would be a far more serious matter than any other challenges created by the age shift. Everything that we have in this country -- our rising standard of living, our capacity for building wealth in the private sector, our ability to meet the ever-expanding needs in the public sector -- all of this depends on sustaining growth.
Some people think that immigration will make up the difference. And certainly, the U.S. economy will continue to benefit from a steady flow of new immigrant workers. But to replace a loss of 76 million boomers from the workforce, current levels of annual immigration would have to be increased something like 400 percent. The logistical difficulties, not to mention the political issues, of very large-scale immigration make this seem a highly unlikely solution.
Theoretically, a large enough improvement in productivity could offset the workforce decline. But even the very high rates of productivity growth we've seen recently, on the order of 3 or 4 percent per year, would not even come close to filling a gap this great.
So where will the needed workers come from?
Clearly, a significant fraction will have to come from the workforce of today and yesterday. Thanks to the new "health span," the lengthening of middle age, this is possible.
Thus, potentially, our future economy will have available the services of a large number of talented, highly experienced workers, people who are at least able to work well beyond the current retirement age.
Whether they’ll be willing to stay in or return to the workforce is another issue. After all, for a decade, at least, the trend has been toward earlier and earlier retirement. Reversing that trend is not going to be an easy sell.
Many will feel a strong financial pressure to stay longer. Clearly, the current compact for Social Security and health care can’t be continued indefinitely without some major modifications -- higher taxes, lower benefits, later eligibility dates, means testing, perhaps some combination of these measures.
The real issue is whether, in addition to this push from reality, we employers can’t find some more appealing way to pull, to invite and induce, these skilled and experienced people back into the national workforce.
I can envision a broad range of experiments, essentially re-engineering how we work. Indeed, employers might have to rethink the whole paradigm of a career path. In the modern era, for most people, a career is a 40-year climb up a steep mountain. The higher you go, the harder it gets and the more you are asked to carry. And then at some point in your early to mid-60s, wherever you are on the mountain, all at once you trade in your pack for a parachute and launch yourself off into retirement. Many people are eager to jump -- they’re simply tired of climbing that mountain.
I wonder if it absolutely has to be that way. I wonder if, instead of a sudden plunge, there could not also be an option of a gradual descent back down the mountain, a phased-in retirement, if you will. Arranging hours and adjusting financial incentives would be the easy part. The hard part would be creating psychological incentives so that workers would look forward to those extra years in the way that they now look forward to quitting work for good.
Changing the composition and culture of the workforce is only one aspect of how the senior boom might transform our economy.
In fact, the rising of the age wave is going to be the social equivalent of a "phase shift." Almost every part of our social and economic order will be forced to adjust.
But far from being a catastrophe, I believe this shift will act as an incredible driver of "creative destruction," making many familiar products and services obsolete and others, some not yet imagined, needed and desired. It will thus provide a tremendous stimulus to innovation, renewal and economic growth.
Consider financial services. All of the traditional assumptions underpinning our pensions systems, public and private, need reworking. We’ll need new instruments and incentives for retirement savings as well. And all forms of insurance, but especially health insurance, will need creative adjustments to reflect the new demographics.
Think of real estate: Will the building trends continue to favor two-story houses and increasing square footage? Or will the new seniors be looking for something very different? How important will connectivity be in future homes? Will new technologies to support independent living be developed and deployed in housing of the future? What locations will be the destinations of choice for new retirees? Will large cities be reenergized or avoided? Whatever the answers, this sector is likely to undergo massive change.
Businesses involved in travel and tourism should experience a windfall. Leisure time and disposable income are the key drivers of that sector, and, even today, senior households have more of both than younger ones.
What about industries related to recreation and entertainment? When one in every five Americans is over 65, will movie producers still be targeting eighth graders? Will the music industry take notice? Will advertisers? At the very least, it seems likely that our cultural outlook may broaden beyond its current close focus on youth.
In fact, it’s hard to see what economic sector will not feel this irresistible stimulus to change and thereby to grow. But it’s easy to see which sector will emerge as the strongest driver of growth in our economy. It has to be those industries near the center of the biomedical revolution.
As the new sciences of genomics and related disciplines teach us more about the fundamental processes of disease, we are beginning to develop new medicines that will make most of the things we're doing today look low-tech.
Other health technologies -- diagnostics, imaging, medical devices, surgical practices -- are undergoing revolutionary change as well.
In effect, what is occurring is a rapid rise in our collective "medical IQ," increasing the odds that in the near future we will be able not only to more effectively treat and cure many diseases but even to predict and prevent them altogether.
As this technological cluster continues to grow, it pumps ever-larger volumes of money into other sectors as well, building demand for chemicals, machine tools, lab equipment, construction services, and, very importantly, information technology.
Conversely, the fundamental advances occurring in biomedicine are finding new applications, and working parallel transformations, in other vital industries -- agriculture and food production, environmental management, materials sciences, and more.
Already, the positive economic effect on the U.S. economy is profound. Hundreds of billions of dollars of wealth have been created for pension funds and individual retirement accounts. Billions of dollars in income taxes flow into government coffers every year. Ten million people now work in the health care industry.
And of course, with each passing year, the ultimate result is longer, healthier lives for millions of people.
As we move forward, this dynamic cycle of expanding solutions to expanding needs may indeed form a new paradigm so pervasive as to reshape the key industries of the U.S. into what one writer has called "the health care economy."
Those who hold the conventional view actually see this as a cause for alarm. But this is because they see it only as a cost. They do not equate the creation of better health with the production of an economic good.
In fact, in the current literature of health economics, there is abundant evidence that new medical technologies more than pay for themselves by replacing less effective and more costly treatments, by preserving millions of days of worker productivity that otherwise would be lost to illness, and, ultimately, by restoring many years of precious life for millions of individuals.
It would seem that, far from being something to fear, a health care economy should be something to cultivate.
The goods and services associated with the life sciences are as viable an economic locomotive as any. The message from the age wave is that these goods and services are what our society will need and want most as we go forward.
When we consider all these effects in perspective, it seems to me there is every reason to view the future with hope, even with optimism. This is not to say that the coming age shift will not bring challenges. Clearly it will. Giving people longer lives, even with lower disability, does mean that as a society we will have to find ways to help a growing number of the very old, and that will consume resources.
But it is also clear that the net gain, the positive contribution of this new wave of elders, should more than offset the costs. Indeed, as I’ve suggested, they may be the key to our continuing prosperity as a nation.
Somehow, this potential, indeed, this whole subject, needs to receive more attention in policy circles. As they plan for the future of aging, our leaders need to be aware of benefits as well as costs of investing in the health of the elderly. They need a broader outlook and longer timeline.
I see some promise, some important seeds of hope, in the new Medicare legislation. I hope that our leaders will nourish those seeds and build on that promise.
Whatever they do, they need to take great care not to enact any policy that may have the unintended consequence of shutting down investments in new medical technologies. Such a course would chain us to the past and forfeit a brighter future.
With a more balanced perspective, I believe many would conclude with me that, yes, the age wave may represent the end of the world as we know it.
But at the same time, it may just be the beginning of a better world than we have ever known.
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