How America Can Afford to Grow Older: A Vision for the Future

Source: AARP Press Center | September 7, 2005

Tom Nelson
Chief Operating Officer of AARP
The West Virginia Governor's Summit on Aging Conference in Chester, WV

Thank you, Frank. I hear you've been doing great work in West Virginia. You've had a lot to be proud of in the past year. I know that you and all of the people in the West Virginia office have done a terrific job with membership-you're up to nearly 300,000 now. And you've tripled the number of people who have signed on to become part of the volunteer corps.

I hope you'll pass along my thanks to your governor, Joe Manchin. I know he shares our commitment to address the important issues that affect an aging population. The issues that we're here to talk about at this Summit on Aging.

And I'd like to thank the Bureau of Senior Services, the AARP West Virginia office, and all the other organizations that had a hand in arranging this conference. I am very pleased to be here.

Often when I talk to a group, I tell them right away that I'm 55-years-old. I get to say that - loud and proud - because I work for AARP. At AARP, we celebrate the aging process. Heck, we don't even let you into our club until you're 50.

The truth is, I start that way because it wakes people up. Gets them to pay attention. They're not used to hearing someone admit to his age. In public. And more than that, they're not used to someone being proud of being over 50.

It would take a lot more than admitting my age to startle all of you. You already know that age isn't something to hide.

But if other people can't accept their age, how can we expect them to be aware of the opportunities and challenges that accompany the aging process?

How can we expect them to anticipate what it will take to create the kind of society that AARP is working toward-a society where everyone can age with dignity and purpose?

So all of us here today need to be the leaders for positive social change. We need to be the ones to ask the tough questions.

Questions like: Can America afford to grow older?

Can we do so without sticking our children and grandchildren with the bills?

Can we help older Americans maintain their quality of life?

Can we preserve the integrity of those programs, public and private, that help older Americans maintain that quality of life?

And how do we achieve these objectives without seriously damaging our economy?

These are some of the most critical issues that we face as the baby boomers edge closer to retirement. In 2008, less than three years from now, the first of the baby boom generation is eligible for Social Security. And three years after that, 2011, is when they'll be covered by Medicare.

Determining how best to adapt to an aging society is one of the most important issues of our time.

Because, right now, West Virginia is among the top three states with the highest percentage of residents who are 65 and older, because you're second only to Florida when it comes to the percentage of older drivers on the road, and because you're looking at population projections that indicate more than one quarter of West Virginians will be over the age of 65 in the year 2030 - I am sure you know just how important this issue is.

You've probably heard the dire predictions:

David Walker, Comptroller General of the United States, has said, and I'm quoting, "The U.S. faces a long-term deficit that will only increase as the baby boomers retire. The resulting financial imbalance will test the nation's spending and tax policies."

Columnist Robert Samuelson has written that, "the central distributional issue of our time is not between rich and poor. It is between retirees and non-retirees."

Federal Reserve Chairman Alan Greenspan, the Congressional Budget Office and others have reached similar conclusions.

Clearly, there are challenges with an aging society. So again, we need to ask the question: Can America afford to grow older without economic train wrecks, without pitting the needs of the old against the young, and without leaving future generations to clean up the mess?

At AARP the answer is: Of course we can. We are the richest nation in the world and the best equipped in virtually every way to reinvent our systems and programs. And besides, what is the alternative?

While I have to admit that AARP may not have all the answers, we do have a vision of what can be done to keep us heading in the right direction.

You'll receive copies of AARP's Blueprint for the Future on your way out. We've called it "Reimagining America" because we want people to take another look at what lies ahead. We want people to re-think, to re-imagine, and at the same time, remember the attitudes and goals that helped make this country great.

I'd like to highlight some of the important points in our Blueprint.

When the baby boom first began after World War II, did we say, "Sorry, we can't afford all these babies…can't afford to build schools and train pediatricians and cope with the costs of all this?"

No, we made the necessary investments, and as a result, became a better society and the most powerful and influential nation in the world.

As a nation, it's time to tune out the pessimists and attack the issues, following John Gardner's approach. He said that, "We are all faced with a series of great opportunities, brilliantly disguised as insoluble problems."

As we look at an aging America, we face three great problems --- no, make that opportunities:

The opportunity to transform the nation's health-care system;

The opportunity to strengthen our retirement system;

The opportunity to create more livable communities.

First, our health-care system is out of whack. Dr. Henry Simmons, President of the National Coalition on Health, calls it "A Perfect Storm."

We've got three dangerous trends coming together: rising costs, millions of Americans who aren't covered by insurance and poor health care delivery.

Transforming the health care system may be the greatest of all the challenges, but it is also the most important thing we can do to improve the quality of life for everyone, and to make the delivery of care more cost-effective.

Many people look at the growing cost of Medicare and Medicaid, along with the aging of the population, and conclude that these programs are unsustainable budget breakers.

But most of the factors contributing to the rising costs of Medicare and Medicaid, are the same factors that are driving up the costs of health care for everyone.

You probably know the list as well as I do:

• the population is growing which means that
• more people are using health care services
• while at the same time all our wonderful new technology doesn't come cheap and
• the prices of new drugs are soaring.

Look at Medicaid, the nation's largest health insurance program, providing necessary care for one in every six people nationally, and one in every five people in West Virginia.

It is the safety net for children in poverty, for our aging parents and grandparents needing long-term care, for those with disabilities, for other vulnerable people. It helps pay the bills for two-thirds of the 1.4 million people in nursing homes. And last year, more than one half of the births in West Virginia were covered by Medicaid.

Medicaid spending, which grew by about a third between 2000 and 2003, was driven primarily by growth in enrollment, and like the rest of health care, fell victim to rising prescription drug and hospital costs.

As many employers drop health insurance-or it becomes too expensive for employees to pay-people turn to Medicaid as a last resort. Much of Medicaid's spending growth reflects a shift from private to public spending, not additional dollars being spent on health care overall.

AARP believes there are ways to make Medicaid more efficient and reduce costs, including buying prescription drugs more cheaply and redirecting spending more toward home- and community-based care and less on nursing homes.

This summer, AARP volunteers and activists spent the August Congressional recess meeting with members of Congress in their states, urging them to stop budget cuts that weaken this important safety net.

Here in West Virginia, AARP has been having an ongoing dialogue with the governor's office, policy makers and law makers about strengthening not just Medicaid, but Social Security and Medicare, as well.

With nearly 40 percent of West Virginians on either Medicaid or Medicare, with 22 percent of the population of West Virginia receiving Social Security, this dialogue is critically important to the health and well-being of everyone in this state.

Capping, or simply cutting federal spending on Medicaid only shifts the burden to the states and/or increases the amount of uncompensated care among doctors and hospitals…which in turn would inevitably be shifted to employers and employees as higher premiums.

The solution lies in taking a long-range view and attacking the problem at its source: our dysfunctional health care system, which is grossly inefficient, and often does harm when it is supposed to be doing good. It doesn't make sense to fine tune individual programs when the whole system is broken.

We can make health care much better-and constrain costs in the long run. Here are seven ways to do it:

1. Achieve the efficiencies and savings that information technology can deliver. It helps achieve many of the other goals for transforming health care.

Most medical records are still kept on paper and mailed or faxed. This is painfully slow and costly. So are prescriptions, which would be more accurate, faster, and cheaper if they were "e-prescribed," as is now called for in the new Medicare law. Some hospitals and practices have good internal IT systems, but they aren't connected to each other. So your primary care physician and, say, your orthopedist cannot be on the same virtual page at the same time.

Creating this infrastructure will cost us money now. But in the future there will be a huge return on investment-and we can pay for it ourselves, not put off the day of reckoning for the next generation. Fortunately, this is starting to gain some momentum.

2. Reduce medical errors, which result in hospitalizations and deaths in the hundreds of thousands. This will improve quality and reduce the cost of care.

The Midwest Business Group on Health found that failure to focus on quality - and thus tolerating too high a level of medical error - costs the nation's businesses about $300 billion a year, or between $1700 and $2000 per employee.

Aside from the harm done to patients, aside from the inappropriate or undelivered care, aside from the overall negative effects on health status, it is clear that we will never manage the costs of health and disease if we continue to waste money like this.

And, here again, IT can help. It has been shown to reduce medical error-such as wrong dosages or the wrong medication-by as much as 90 percent.

3. Promote health and healthy behavior from infancy onward.

There are some things we can't do much about, such as genetics and accidents. But we can affect the majority of our health outcomes, and we need to take personal responsibility for our health and the health of our children and grandchildren.

At the National Institute on Aging they say that, "Osteoporosis is a pediatric disease with geriatric consequences." If you don't get enough calcium in your teen years when you build more than 90 percent of your bone mass, you will pay the price when you are older.

And, as we say in our AARP program in 27 states to promote physical activity, "If you've got a moving part, move it."

Did you know that the largest increase in chronic diseases is among people in their 30s, including obesity and diabetes? In nearly all cases, these problems are caused by behavior-by eating too much, by exercising too little.

AARP West Virginia's Steps to Better Health Project is a great example of how you're trying to reduce the high incidence of obesity while encouraging physical activity with programs like the Annual Labor Day Charleston Power Walk, the Alzheimer Memory Walks, and the American Heart Walk.

4. Focus more on chronic care management.

Chronic conditions are more and more common, yet our health care tends toward acute and episodic care, an expensive misallocation of resources.

About five percent of Medicare beneficiaries account for about half the money spent. Many of these people have multiple chronic diseases.

As you know, treating chronic conditions, because they are so common, is very costly, yet many of them are among the most preventable.

Obviously we want to prevent the onset of chronic diseases, but we have to accept that they exist and manage their care and their cost better.

5. Move toward a prevention model of health care.

We can't prevent all disease, but we can do much more to keep people out of doctors' offices and hospitals.

This is just what AARP hopes to do in our new partnership with the Centers for Disease Control and Prevention.

Another way to prevent hugely expensive and tragic diseases is to fully support the National Institutes of Health, from which cures and treatments for Alzheimer's, diabetes and Parkinson's, for instance, would prolong healthy life and save billions.

6. Bring down the high costs of prescription drugs for all Americans.

These drugs keep people independent, working and out of hospitals and nursing homes…but not if people can't afford them.

We need to invest in evidence-based drug research, increase our use of generic drugs, accelerate the development and approved use of generic biopharmaceuticals, use innovative strategies like pooled purchasing, facilitate the wise use of pharmaceuticals and legalize safe importation from other countries.

7. Provide everyone with access to the health-care system.

Over 45 million Americans lack health insurance; many are working people or kids in families where at least one parent works.

The fact is that the uninsured tend not to see doctors, and then go to the emergency room when something is serious or life-threatening. This is the most expensive and least effective way to deliver medical care. We absolutely must solve this problem, and not by simply shifting costs from one sector of the economy to another.

Each of these seven things is tough to achieve. None is impossible. They will improve the quality of care for all Americans, and give us much better value for our money.

They will help make Medicare and Medicaid sustainable over the long run. And, they will help ease the burden on business and individuals.

So let's get after it. This investment will make life better for future generations, and we'll pay for it as we go along, not pass it on to our children and grandchildren.

Now, let's turn to economic security. We can enhance our retirement system by strengthening Social Security, creating more pensions and savings and providing employment opportunities for people as long as they want or need to work.

Social Security is the most successful domestic program in our history, a risk-free, guaranteed pension that on average replaces 40 percent of a retiree's wages.

And with 27 percent of West Virginians over the age of 65 counting on Social Security as their sole source of income, I don't think I can overstate the vital importance of this safety net.

President Bush has put Social Security high on the nation's agenda, which gives us the opportunity to strengthen the program for future generations.

As you know, AARP is, and will be, deeply engaged in the national debate as it continues on this year. We believe that now is the time to act. We can spread any costs over all generations, rather than leaving it to our kids and grandkids to shoulder the load.

One great example of AARP's commitment to strengthening Social Security is right here in West Virginia, where you were so successful last year in getting West Virginia's offset law taken off the books.

Older workers can now continue receiving their full Social Security benefits if it becomes necessary for them to collect unemployment insurance for a while.

And unlike health care, Social Security does not need a radical overhaul. We don't have to dismantle this successful program in order to save it. There are reasonable, moderate changes we can make to achieve solvency and fiscal soundness, just as has been done before.

The President has said that all ideas are welcome. Here are a couple of examples that, combined, would get us well over half way toward solvency, and there are other possible options to consider:

Restore the total wages taxed by Social Security to 90 percent of nationwide earnings.

This would move the cap from $90,000 in 2005 to $140,000-perhaps phased in over a decade. It would lower the projected shortfall by some 43 percent.

Diversify Trust Fund investments in a total market index fund, like most pension funds, to get a higher return, which could fix about 15% of the problem.

Reasonable steps such as these, including possibly adjusting benefits, are enough to strengthen Social Security for the long term.

But taking money out of Social Security payroll taxes for private investment accounts would worsen the solvency outlook rather than improve it, and could lead to large benefit cuts. This approach is risky, hugely expensive and unnecessary.

Strengthening Social Security is the cornerstone of providing economic security for future generations, but creating and protecting pensions and savings are also essential.

Defined-benefit pensions are being replaced by defined-contribution plans like 401(k)s and IRAs. This shifts the investment risk to the individual. We have long championed improvements in these private accounts. But for a secure retirement, we need these savings in addition to Social Security, and definitely not at the program's expense.

The federal government's retirement system-the Thrift Savings Plan-does this now. Ironically, some of the supporters of private accounts at the expense of Social Security cite this program. Well, it's precisely the model we would like to see: Social Security as the foundation, supplemented by a private pension and savings.

As Henry Aaron at the Brookings Institution has shown, increasing national savings is a proven way to grow the economy while lessening the burden on future generations. But the savings rate in America is abysmally low.

People need to save more, and there are two steps we can take that are relatively simple. First, new employees joining companies with a 401(k) usually have to decide whether to join the plan. But if they were automatically enrolled and had to make a conscious decision to opt out, savings would increase dramatically.

The second way to increase savings is to provide an option for those receiving tax refunds to have all, or a portion of it, automatically deposited into the individual's savings.

According to the experts, these two steps alone could double the nation's savings rate and provide people with a much greater retirement income.

About half our working population does not have a pension plan. For these people, there are few options currently available to save for retirement. One choice is the saver's credit- an income tax credit that's available for eligible taxpayers who contribute to a retirement plan or IRA.

But the saver's credit is small, it expires in 2006, and it is not refundable. It should be enhanced and made permanent.

We also need to explore bigger ideas, such as a universal plan that would require employers to make available to each worker the option of a 401(k)-type retirement account.

Chairman Bill Thomas of the House Ways & Means Committee and Chairman Jim McCreary of the Subcommittee on Social Security have both said they want to think outside the box about combined strategies to strengthen Social Security, increase national savings and perhaps address the problem of long-term care. AARP stands ready to help.

As people age, there is more they can do for themselves. Among the most important is to continue to work, if they are able. There are huge benefits to this.

Older workers continue to earn money in addition to their income from Social Security and pensions. They stay engaged and productive. And while getting their retirement benefits, their wages and salaries are still subject to FICA withholding, so they continue to pay into a system that is paying them.

Finally, mature workers will help avert the labor shortages from the retirement of the boomers.

To speed up this trend, we need to reduce age discrimination, which still persists. We need to educate employers about the ability and affordability of older workers. We must inform older people about the opportunities and advantages of work. And we need government policies for employers to hire older workers and for individuals to keep working. Policies, for example, that will eliminate barriers to phased retirement.

AARP is engaged in tackling these issues on many fronts:

• AARP attorneys have been involved in a series of cases against employers who used forced ranking systems-systems that evaluated employee performance-to discriminate against their older workers.
• As a result of AARP's success, several employers have been forced to eliminate those systems.
• We recently launched a major workforce initiative that began with our Home Depot partnership and now involves many major employers, as well as the governors of a number of states, to encourage hiring of older workers.
• Also, in two weeks AARP will honor the winners of our Best Employers for Workers over 50 Award.

Companies from around country can apply to be considered for this award. A panel of expert judges evaluates them, looking to see which ones provide the very best practices and policies for older workers.

The award is given to those companies that set the highest standards in areas like recruiting and retaining older workers, offering opportunities for continued advancement and flexible schedules.

This year, three of the winners come from West Virginia. All three are hospitals: St. Mary's Hospital, WVU Hospitals, and Cabell Huntington Hospital.

This is the third year St. Mary's has made the list and the second year for WVU. Altogether it's remarkable showing for West Virginia. Congratulations.

So, with moderate adjustments to Social Security, with increased individual savings and investment, and by advancing the idea of continued work, America can afford to grow older without shifting the burden to younger generations.

Now, let's turn to our third opportunity-creating more livable communities. Most older people want to stay where they are-at home, in familiar surroundings. This may seem obvious, but there are many barriers to living in our own homes and communities as we age.

To remain independent in this automobile society, people need to be able to drive safely as long as possible. AARP's Driver Safety Program helps drivers over the age of 50 refine their skills and develop safe, defensive driving techniques. The program is taught and administered by volunteers.

Not surprisingly, West Virginia, with its high percentage of drivers over 65, also has a high percentage of Driver Safety Program graduates.

But when people can no longer drive, they must have ways to avoid social isolation.

Unfortunately, many communities lack the features and services-from pharmacies to super markets to doctors to churches-that people can get to without driving.

So, how do they get around? In cities with mass transit, there are obvious possibilities. But in the suburbs-where nearly half the population lives-mass transit is not always available. And in rural communities, as many of you know, it is simply not there.

Add bad weather and you're guaranteed to have significant numbers of people shut in and isolated. Cut off from the activities and services they need.

AARP West Virginia's "Blizzard Box" program that was so successful last year in providing emergency meals to older homebound people is one important way communities can make up for their lack of accessible transportation.

The level of support and involvement for that program, both locally and statewide, illustrates perfectly why so many people want to stay in their own communities as they age.

We also need more transit programs like OATS, Inc. in rural Missouri. This non-profit transportation provider has been in business for more than 30 years. OATS uses a highly successful blend of professional and volunteer drivers to serve the poor and the elderly. It operates in 87 of Missouri's 114 counties with a fleet of more than 550 vehicles. Last year it provided more than a million one-way trips.

A second key to helping people age independently in place is building or modifying houses to more easily accommodate older people. Successful aging in place means that people can afford to live in decent housing that meets their needs and helps them remain independent.

There is a powerful message in this about quality of life for older people and their adult children, who are often caregivers. And continued independent living also means substantial cost savings for society and for families.

Along with health and physical safety, AARP is also is working to strengthen consumer protection. In July, the AARP Foundation received a check from the West Virginia Attorney General's Office to set up an ElderWatch Project which will help older West Virginians fight against financial exploitation.

The program will act as a statewide clearinghouse for information about scams and other fraudulent practices targeted at the elderly.

A similar AARP ElderWatch program, already underway in Colorado, has been educating both the public and law enforcement and social service agencies about the many ways the elderly can become victims of financial exploitation.

Congresswoman Barbara Jordan said, "What people want is… an America as good as its promise."

Achieving this requires a balance between what society can do and what we must do ourselves. We may have to pay a little more, exercise a little more, save a little more, and maybe work a little longer. But we can do it.

I've talked about health and health care, about retirement security and about livable communities. With the changes I've described, America can afford to age, and we'll all benefit from a society in which the wisdom and time and efforts of older people are a vital part of our lives.

But the longer we study and debate and wallow in gloom and doom, the worse our problems will become…and the less time we will have to solve them equitably. The sooner we take on these challenges, the less likely it is that we will leave them for the next generation.

I have said throughout my remarks that AARP is engaged. What does that mean?

I mean that through our members and volunteers, our publications and partnerships, our state offices, through products and services that contribute to social good, and through legislative and legal advocacy, through people like you-we are determined to make a difference for America. We have a strong social impact agenda, and we're on the job.

No permanent friends, no permanent enemies in Washington, just enduring interests.

George Bernard Shaw said that, "We are made wise not by the recollection of our past, but by the responsibility of our future." The responsibility of our future is to join together to create a country:

Where government stands sentry over vital programs like Social Security, Medicare and Medicaid and takes reasonable and responsible steps to strengthen them for generations to come;

Where corporate giants and small businesses alike prize the experience of older workers and reject age discrimination as bad business;

Where people of all ages receive quality health care they can afford;

Where parents and grandparents can remain in their homes and active in their communities for as long as possible ; and

Where all Americans can afford to grow old with dignity and purpose and continue chasing their dreams;

We can do this. And when we do, we will not only fulfill our responsibility to future generations, we will create an America as good as its promise.