People today can generally expect to live longer and, in some parts of the world, healthier lives. The substantial increases in life expectancy underlying these global demographic shifts represent a human triumph over disease, hunger, and deprivation, but also pose difficult challenges across multiple sectors. Population aging will have dramatic effects on labor supply, patterns of work and retirement, family and social structures, healthcare services, savings, and, of course, pension systems and other social support programs used by older adults. Individuals, communities, and nations around the world must adapt quickly to the demographic reality facing us and design new approaches to financing the many needs that come with longer lives.

This imperative is the focus of a newly published special issue of The Journal of the Economics of Ageing, entitled Financing Longevity: The Economics of Pensions, Health and Long-term Care. The special issue collects articles originally written for and discussed at a conference that was dedicated to the same topic and held at Stanford in April 2017 to mark the tenth anniversary of APARC’s Asia Health Policy Program (AHPP). The conference convened top experts in health economics and policy to examine empirical and theoretical research on a range of problems pertinent to the economics of aging from the perspective of sustainable financing for long lives. The economics of the demographic transition is one of the research areas that Karen Eggleston, APARC’s deputy director and AHPP director, studies. She co-edited the special issue with Anita Mukherjee, a Stanford graduate now assistant professor in the Department of Risk and Insurance at the Wisconsin School of Business, University of Wisconsin-Madison.

The Financing Longevity conference was organized by The Next World Program, a Consortium composed of partners from Harvard University, Fudan University, Stanford University, and the World Demographic and Aging Forum, and was cosponsored by AHPP, the Stanford Institute for Economic Policy Research, and the Stanford Center on the Demography and Economics of Aging.

The contributions that originated from the conference and are collected in the Journal’s special issue cover comparative research on more than 30 European countries and 17 Latin American countries, as well as studies on Australia, the United States, India, China, and Japan. They analyze a variety of questions pertinent to financing longevity, including how pension structures may exacerbate existing social inequalities; how formal and informal insurance interact in securing long-term care needs; the ways in which the elderly cope with caregiving and cognitive decline; and what new approaches might help extend old-age financial security to those working outside the formal sector, which is a major concern in low-income countries.

Another challenge of utmost importance is the global pension crisis, caused due to committed payments that far exceed the saved resources. It is a problem that Eggleston and Mukherjee highlight in their introduction to the special issue. By 2050, they note, the pension gap facing the world’s eight largest pension systems is expected to reach nearly US $400 trillion. The problem cannot be ignored, as “the financial security of people leading longer lives is in serious jeopardy.” Indeed four of the eight research papers in the special issue shed light on pensions and inequality in income support for older adults. The other four research papers focus on health and its interaction with labor force participation, savings, and long-term care.

The issue also features two special contributions. The first is an interview with Olivia S. Mitchell, a professor at the University of Pennsylvania’s Wharton School and worldwide expert on pensions and ageing. Mitchell explains the areas offering the most promise and excitement in her field; discusses ways to encourage delayed retirement and spur more saving; and suggests several priority areas for future research. The latter include applying behavioral insights to questions about retirement planning, improving financial literacy, and advancing innovations to help people imagine themselves at older ages and save more for their future selves.

The second unique contribution is a perspective on the challenges of financing longevity in Japan, based on the keynote address delivered at the 2017 Stanford conference by Mr. Hirotaka Unami, then senior Director for policy planning and research of the Minister’s secretariat of the Japan Ministry of Finance and currently deputy director general with the Ministry’s Budget Bureau.

In Japan, decades of improving life expectancy and falling birth rates have produced a rapidly aging and now shrinking population. Data released by Japan’s Statistics Bureau ahead of Children's Day on May 5, 2019 reveal that Japan’s child population (those younger than 15) ranks lowest among countries with a total population exceeding 40 million. In his piece, Unami focuses on the difficult tradeoffs Japan faces in responding to the increase in oldest-old population (people aged 75 and over) and the overall population decline. Japan aspires to do so through policies that are designed to restore financial sustainability for the country’s social security system, including the medical care and long-term care insurance systems.

Unami argues that Japan must simultaneously pursue a combination of increased tax revenues, reduced benefit growth, and accelerated economic growth. He notes that these three-pronged efforts require action in five areas: review Japan’s pension policies; reduce the scope of insurance coverage in low-risk areas; increase the effectiveness of health service providers; increase a beneficiary’s burden according to their means; and enhance policies for preventive health care for the elderly.

The aging of our world’s population is a defining issue of our time and there is pressing need for research to inform policies intended to improve the financial well-being of present and future generations. The articles collected in the Financing Longevity special issue and the ongoing work by APARC’s Asia Health Policy Program point to multiple areas ripe for such future research.

View the complete special issue >>

Learn more about Dr. Karen Eggleston’s work in the area of innovation for healthy aging >>

Could out of pocket drug costs be responsible for pandemics? In this Public Health Perspectives article, Marcella Alsan discusses how copayments for antibiotics can cause people in poor areas to turn to unregulated markets.

On May 26, 2016, researchers at the Walter Reed National Military Medical Center reported the first case of what they called a “truly pan-drug resistant bacteria.” By now, the story has been well-covered in the media: a month earlier, a 49 year old woman walked into a clinic in Pennsylvania with what seemed to be a urinary tract infection. But tests revealed something far scarier—both for her and public health officials. The strain of E. Coli that infiltrated her body has a gene that makes it bulletproof to colistin, the so-called last resort antibiotic.

Most have pinned the blame for the impending doom of a “post-antibiotic world” on the overuse of antibiotics and a lack of new ones in the development pipeline. But there’s another superbug incubator that hasn’t gotten the attention it deserves: poverty.

Last month at the IMF meeting in Washington, D.C., UK Chancellor George Osborne warned about the potentially devastating human and economic cost of antimicrobial resistance. He called for “the world’s governments and industry leaders to work together in radical new ways.” But Gerry Bloom, a physician and economist at the Institute for Development Studies, argued that any measures to stop overuse and concoct new drugs must be “complemented by investments in measures to ensure universal access to effective antibiotic treatment of common infections.”

“In many countries, poor people obtain these drugs in unregulated markets,” Bloom said. “They often take a partial course and the products may be sub-standard. This increases the risk of resistance.”

For at least fifteen years, we’ve known about these socioeconomic origins of antimicrobial resistance. Other studies have revealed problems with mislabeled or expired or counterfeit drugs. But the clearest link between poverty and the rise of antimicrobial resistance is that poor people may not see a qualified health care provider or complete a course of quality antibiotics. Instead, they might turn to unregulated markets for substandard drugs.

But why do people resort to unregulated markets or take drugs that aren’t that great if they are available? Marcella Alsan, an assistant professor of medicine at the Stanford School of Medicine who studies the relationship between socioeconomic disparities and infectious diseases, led a study that answered this question. In last October’s Lancet Infectious Diseases, Alsan and her colleagues showed that it might have a lot to do with requiring copayments in the public sector. To show this, they analyzed the WHO’s 2014 Antibacterial Resistance Global Surveillance report with an eye toward the usual suspects, such as antibiotic consumption and antibiotic-flooded livestock.

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