Economic Well-Being
of Non-Institutionalized Elderly with Functional Limitations
Marlene
S. Stum, State Extension Faculty, Family Economics and Gerontology
University of Minnesota Extension Service, Specialist Research Report,
August 1992 (reviewed 2001)
University
of Minnesota Children Youth & Family Consortium. Permission is granted
to create and distribute copies of this document for non-commercial
purposes provided that the author and CYFC receive acknowledgement and
this notice is included.
Understanding
economic well-being of the elderly involves going beyond averages of
all individuals over 65 years to understanding how diversity among the
elderly and aging differently can effect economic status. This report
focuses on understanding the economic well-being of a growing subgroup
of elderly-- non-institutionalized elderly facing risks of health problems
and disabilities. Health and disability problems, including the need
for long term care, are uncontrollable life events associated with increased
poverty and economic insecurity. The primary financial impact of long
term care is currently borne by the income and assets of the elderly
and their family members (Feder, 1991). A majority of individuals who
need long term care remain in their home and rely heavily on the time,
energy, and human capital of informal family caregivers (Stone, Cafferata,
& Sangl, 1987). In addition, research suggests that 40% of the elderly
with one or more disabilities have unmet needs, primarily due to the
inability to obtain or pay for care (General Accounting Office, 1988).
Longer
life expectancies and aging of the "baby boom" age cohort
and of the population in general suggests that the number of elderly
with long term care needs are likely to increase dramatically. The group
85 years and older is growing at a rate 3-4 times faster than the general
population. This age group experiences more problems with health and
functional limitations and requires more long term care than the younger
elderly (Rowland & Lyons, 1991). The projected increase in need
for long term care and the resulting costs for the elderly, their families,
state and federal governments and service providers reinforce the need
to examine the interplay of health care demands on economic well-being
of this subgroup of elderly.
Description
of Study
The
purpose of this study was to add to our understanding of diversity in
and predictors of economic well-being among non-institutionalized elderly
with functional health limitations. Data used in this analysis is from
the 1984 National Long Term Care Survey (NLTCS) conducted by the Bureau
of the Census and sponsored by the Department of Health and Human Services.
The 1984 NLTCS is the second-wave in a longitudinal survey of the personal
characteristics and use of health-related services by non-institutionalized
disabled elderly in the United States. A sub-sample of 5500 community-dwelling
individuals who reported household income provided the sample for this
study.
An
adjusted money income measure of economic well-being was employed in
this study. Total family money income was used as an appropriate indicator
of economic status of the elderly individual (unit of analysis) given
the assumption that household members pool and transfer resources among
themselves. Total household income was divided by the 1984 poverty threshold
for size of household and number of minority aged children to create
a ratio of income in relationship to needs as a measure of economic
well-being. For example, the poverty threshold for an elderly individual
in 1984 was $4979. An elderly individual with an annual total household
income of $6500 would have an income-to-needs ratio of 1.31.
Health
related demands were measured by the sum of functional limitations with
activities of daily living (ADL) and instrumental activities of daily
living (IADL). ADL measures consisted of six items: eating, getting
in or out of bed, getting around indoors, dressing, bathing, and using
the bathroom or toileting. IADL measures included eight items: doing
housework or laundry, preparing meals, shopping for groceries, moving
about outdoors, going places outside of walking distance, managing money,
taking medications, and making telephone calls.
Findings
Diversity
in Economic Well-being
Of
the elderly in the sample, 32.6% were poor with income-to-needs ratios
below 1.0, 14.1 near poor with ratios from 1.0-1.25, 26.8% of modest
economic well-being with ratios of 1.26-1.99, and 26.5% non-poor with
ratios greater than 2.0. As expected, elderly who were widowed or single,
non-white, female and older were more likely to be poor or near-poor
than their married, white, male, and younger counterparts. For example,
more than twice the rate of widows (42%) were poor compared to married
elderly (19.5%). Black and Hispanic elderly (59.3% and 41.9% respectively)
were much more likely to be poor than White elderly (28.8%). Demands,
or functional limitations were also significant in understanding differences
in economic well-being. Individuals with no IADL limitations were less
likely to be poor (20.4%) than individuals with 4-6 IADL (36.8%) or
7-8 IADL limitations (32.5%). Resource variables were also significantly
related to economic well-being. Disabled elderly reporting one source
of income were more likely poor (58%) while individuals reporting 3-4
sources were more likely non-poor (64.6% and 87.1%). Elderly with either
investment, retirement or earned sources of income beyond Social Security
were more likely to have modest or non-poor economic well-being levels
than be poor or near-poor.
Overall
57.2% of disabled elderly in this sample had private insurance coverage
to protect against some health care risks. This contrasts with Lewin/ICF
and Brookings (1989) findings of 72% of all elderly having private supplemental
insurance. As would be expected, elderly with government sources of
health care risk protection were more likely poor (62.5%) than non-poor
(9.5%) and self-insurers were also more likely to be poor (9.7%) than
non-poor.
Multivariate
Predictors of Economic Well-Being
Overall
34% of the variance in economic well-being was explained using hierarchical
multiple regression analysis to examine the combined predictive relationships
of predisposing, demand and resource variables on economic well-being.
As expected, resources are the most powerful predictors of differences
in economic well-being, accounting for .28 of the total variance. Individuals
with higher resource levels are more likely to have higher income-to-needs
ratios. Within the resource variables, income sources (earned, investment,
and retirement) added more explanation to the variance relative to health
care risk protection measures although both were significant. Race and
marital status, while significant, added relatively little to the explained
variance.
Implications
As
policymakers, educators, and service providers work to address issues
of economic vulnerability of the elderly at both the micro and macro
levels, an understanding of diversity in economic wellbeing and specific
factors which affect economic well-being is critical. While economic
well-being among the elderly has improved overall, non-institutionalized
disabled elderly are clearly a vulnerable sub-group. Almost three-quarters
(73.5%) could be considered at risk with income-to-needs ratios below
2.0, or 46.7% with income-to-needs ratios below 1.25. A combination
of factors, some more controllable than others, are needed to explain
differences in economic well-being at later life stages. This cross-sectional
analysis represents only a snapshot understanding of economic well-being
and does not attempt to capture the dynamic transitions in economic
wellbeing. Longitudinal studies are needed to understand such transitions.
It
appears that improving economic well-being of the elderly will largely
depend on the role of resources, variables over which individuals and
society have more control. Having sources of income beyond Social Security,
especially investment and retirement sources of income, offers protection
against lower economic well-being. In this nationally representative
sample, 42% of the non-institutionalized elderly with functional limitations
had only one income source, primarily relying on Social Security. Education
and job training, availability and quality of private pension plans,
macroeconomic policies, mobility of the work
force, wage rates and racial and sexual discrimination tend to be accumulative
and influence sources of income for elderly individuals. Such factors
also influence whether income is greater than consumption, allowing
the possibility for saving for retirement and additional contingencies
to occur.
Future
cohorts of elderly are expected to experience more diverse sources of
income due to the greater numbers of women in the workforce, and improvements
in the private pension system for all workers; thus more retired women
are likely to have pensions. Subgroups of the elderly, especially minorities,
are still expected to be disproportionately less likely to have retirement
or investment sources of income. The old-old and lower income elderly
in the current elderly cohort are especially at risk with few sources
of income beyond Social Security, with few options or chances to make
changes. These sub-groups may need to be targeted when inequalities
are addressed in policies and programs.
Policies
and programs need to include incentives that encourage and allow individuals
to save for later life stages. It is vital for educators to address
issues of sources of income in ways which will encourage and support
long-term behavior changes that lead to savings. Specific information
on investment and retirement options is needed in a form that can be
understood by consumers. Employers should be encouraged to provide workshops
for employees to assist in decision making,long before retirement occurs.
Such preventative educational programming will assist in developing
adequate resources to cope with demands at later lifestages.
