The much-talked about ‘aged care tsunami’ may hit the sector sooner rather than later, with a leading economist now estimating that its impact will be greatly felt in around 15 years.

Professor Henry Ergas presented his views on the challenge of an ageing population and the issues associated with financing the future at this year’s Aged Care Informatics Symposium in Melbourne.

According to the Professor, certain demographic trends associated with the looming booming population will place even greater pressure on the sector.

He said that the life expectancy gap between men and women aged 65 years old, has shrunk from four years in the 1980s to the current figure of around two years, further decreasing the number of widows entering aged and residential care because of the death of a husband.

That means, he said, that the resulting experience of widowhood is literally disappearing due to improvements in medicine. This trend is set to continue as the life expectancy gap between men and women further compresses over time.

“You will increasingly have very elderly frail couples making it to 90 and 100 years old, which was very rare 20, or more so, 30 years ago.

“So the aged care venue for those people in the future can not be [designed] the same way that we’ve conventionally designed residential care, which does not cater for those very elderly couples who may still have a strong sentimental link to each other even though they may both be very frail.”

The second related phenomenon with this trend, Professor Ergas said, is the “move from a pyramid family to a beanstalk family structure”.

While the pyramid family has the grandparents at its peak, the parents in the middle and many children at its base, the beanstalk model is long and thin, representative of the dense yet evenly skewed distribution of age.

With this beanstalk structure, there are very few but some children, parents and even great grandparents.

“This is an extraordinary phenomenon, unprecedented in human history. Even when you consider the rising age at which people have children, it’s completely unprecedented.

“You have numbers of families where the children are in their early teens and the great grandparents are still alive. That is, again, absolutely unheard of. What that means in terms of how the aged care system works is that you will be dealing with linked generations where there are not just grandparents but great grandparents."

Although the implications of the demographic trend remains to be seen, Professor Ergas predicted that we will have a population with a significant number of very elderly, with severe health issues, in need of care for a greater number of years.

“All of that is what is going to hit the aged care system in the next 15 years. That’s an immense change to the system.”

Faced with this grave problem of how to finance future care, Ergas referred to two main solutions. One of these is to shift more of the burden of aged care funding onto the beneficiaries of care. The issue associated with this however, is that savings and superannuation funds will most likely run dry as people live longer and possibly, experience more illnesses.

The only other option that exists for Australia is to introduce insurance (resembling the health insurance schemes of today) which will account for the variance in aged care costs.

However, Professor Ergas said that designing and providing such products poses a very difficult challenge “that we are not even close to addressing”.

“There are a broad range of options as to how this can be done but all of them have significant complexities,” he said. 

“We have a fantastic aged care system but it is an aged care system that is going to be hit by a tsunami and the question is whether we can design the walls in time.”