NH Public Policy
New Hampshire Center for Public Policy Studies
TOPICS
OTHER RESOURCES

NH's Silver Tsunami: Aging and the Healthcare system

Executive Summary

Date: September 28th, 2011

For decades, healthcare spending in New Hampshire has outpaced overall economic growth – a trend projected to continue into the future. This has caused no small amount of concern for legislators trying to balance state budgets and business owners managing their bottom lines. Prices and utilization are two obvious drivers of this growth: Put simply, health care is getting more expensive, and people are receiving more care, more often.

But there is a less obvious factor behind this trend, as well: New Hampshire’s aging population, which will play a major role in shaping healthcare spending in coming decades. By the year 2020, the state’s shift towards an older population will reach a peak. And by 2030, nearly half a million Granite Staters will be over the age of 65 – a so-called “silver tsunami,” representing almost one-third of the population.

This trend will influence nearly every critical policy debate, but perhaps none more so than health care. Health care use varies by age and gender, and as New Hampshire’s demographics shift, the health care demands of the state’s population will reflect those changes. This analysis by the Center is an attempt to understand this phenomenon and help policymakers, businesses and health-care providers anticipate its implications.

At the heart of this analysis is a projection of health care spending by the major payers (Medicaid, Medicare and private insurance) that can be attributed solely to the aging of the state population. We also explore how an aging population may impact the state’s workforce and the state budget. An aging population will likely place new financial pressures on Medicaid, a shift that will have a big impact on future state budgets. However, many other areas of state government will be affected by New Hampshire’s aging population and its impact on health care, including the Department of Corrections and the Department of Administrative Services.

Among our findings:

An older population will reshape the way New Hampshire pays for health care. Our simulations of health care spending show Medicare, the federal insurance program for those over 65, assuming a larger share of total health care expenditures, as many older residents shift from private insurance to Medicare. But because Medicare reimbursement rates fall short of the actual cost of providing care, this shift will put pressure on the health system to provide more care with less money. This, in turn, will likely accelerate the increase in premiums for private insurance, as care providers look to offset losses from Medicare reimbursements.

Medicaid’s financial focus will shift. Currently, Medicaid allocates 25 percent of its total medical spending to those over 65. Assuming no significant changes to the services provided to that population, that percentage will increase to 52 percent by 2030. As the population ages, the share of Medicaid program expenditures associated with long term care will increase very quickly.

Aging will affect New Hampshire’s regions in very different ways. Demographic trends across the state vary considerably. Therefore, the impact of aging on the health care system needs to be understood differently from region to region. Current population projections indicate that the share of the population over the age of 65 in Coos County, for example, will grow almost 38 percent by 2030. This shift towards an older population would seem to strain the existing health care system. However, it may actually stabilize the financing of the system. As Coos County’s population ages, an increasing share of residents will be eligible for Medicare, which provides cost-based reimbursement to Androscoggin Valley Hospital, a critical-access hospital. In contrast, Carroll County, in which much of the aging of the population is driven by retirees migrating to the region, will likely experience a different effect.

Aging will play an increasingly central role in state budget policy. The aging of the population will have a profound impact on many areas of the state budget, including the purchase of health insurance for state employees and retirees, as well as for the state’s prison population. One example: In less than 20 years, the number of elderly inmates will more than double. The state – and its taxpayers – will be responsible for paying for their health needs. It’s possible the increase in the segment of the prison population will require the construction of a “nursing home behind walls.” How should that factor into larger conversations about corrections reform in New Hampshire?

Efforts to recruit and retain a health-care workforce will face new challenges. New Hampshire physicians are already significantly older than the nationwide physician population. And as the portion of retirees increases, it will bring to the fore concerns about who will care for this aged population. What role will this trend play in New Hampshire’s long-range economic development and workforce plans?

© NH CENTER FOR PUBLIC POLICY STUDIES : One Eagle Square, Suite 510, Concord, NH 03301-4903 : 603.226.2500 : Supported by Altos