Elderly care – coping with the 4:2:1 problem

July 30, 2014 by Denis Green

As the number of elderly people in China continues to climb, the pressure on their offspring to find a way of caring for them has increased dramatically. Once it was the family that provided care for older relatives, but today that is a distant memory. Falling birthrates, exacerbated by the one-child policy first introduced in 1979 and other factors, have led to major growth in the percentage of elderly people in the population. Now China is facing what has become known as the 4:2:1 problem – namely, there are now four grandparents and two parents for every one working Chinese.

China already has the world’s largest elderly population, with 194m people (14.3% of the population) over the age of 60 in 2012, and predicted to rise to 300m by 2024. In addition, according to a recent report by the China-Britain Business Council, China’s population is ageing faster than almost every other society in the world; it is predicted that by 2050 the number of elderly will have risen to at least 400m, or more than a third of the population.

By then, only Japan will have a larger percentage of elderly it its population. UN data predicts that from 2010-2040 the percentage of China’s population over the age of 60 will increase from 12% to 28%. By 2040 China is forecast to have around 90m people aged over 80, over half of whom will be entirely dependent on others for their care.

After the Communist Party came to power in the middle of the last century China’s population boomed. But even before the introduction of the one-child policy in 1979, China’s birth rate had begun to fall, as it often the case when agrarian societies begin to urbanise. However, the new policy certainly did not help; by limiting urban couples to one child, it reduced fertility dramatically and prevented about 300m births over its 30-year history.

So how will China be able to care for its rapidly ageing population? The obvious answer is to stimulate the growth of care homes for the elderly. According to Dr. Zhanlian Feng, senior research analyst in the Aging, Disability and Long-Term Care Program at RTI International: “The main challenge is to put in place a working system of senior care services that are accessible and affordable to the majority of frail older people who need such services and to get there relatively quickly. There is a lack of physical infrastructure (residential care facilities, adult day care centres, elder-friendly communities) which has been much of the current policy focus,” he told China Outlook.

One factor slowing the growth of China’s care home industry is the traditional belief that children should care for their parents themselves, which makes Chinese people reluctant to leave their relatives in retirement homes. In most traditional Chinese homes, having three generations under one roof was once seen as the norm. However, the filial piety tradition of a mutually beneficial household where grandparents live with their adult children during their old age, providing help in looking after their grandchildren, is no longer sustainable.

“I would say this attitudinal shift reflects a ‘forced’ change driven by a multitude of factors,” says Dr. Feng. “There are many fewer children relative to elderly parents now than ever before, and most families in Chinese cities and towns have just one child. Most grown up children chase employment and career opportunities wherever those opportunities take them. This means increased geographic dispersal of Chinese families.”

The tradition of multi-generational co-residence is losing appeal not only among the younger generation but also among the older generation. For those who can afford it, a good-quality nursing home or residential care facility is increasingly seen as a meaningful and preferred option that provides more autonomy and independence. Unfortunately, they are few and far between. As the CBBC report notes: “There is a huge range of institutions claiming to provide homes for seniors, but only a few genuine projects are currently operating in China. Most differ only minimally from general housing developments.”

China is thus starting from a very low baseline in terms of the amount of elderly accommodation that is available. “The supply of senior care is inadequate. Though there is no official number, it is estimated that there are 40,000 residential care facilities in China”, says Dr Feng. “There are about 3.2m beds in total, and around 2m elders live in these facilities. This translates into a ratio of less than 2% of seniors who live in senior care facilities as a percentage of the total senior population – much lower than the percentage demonstrated in more advanced economies”.

Can the private sector fill the gap in provision? The current five year plan stipulates that by 2015 90% of seniors should be cared for at home; 7% should be cared for in the community; and 3% should be cared for in institution. According to the CBBC report, by 2015 China expects to have a total of 6.6m beds, equivalent to 30 beds per 1,000 elders. The Chinese state is now keen to encourage private-sector growth to address this bed shortage.

“Wholly foreign owned companies would be authorized to operate business in this sector. There is also a new policy document a couple of months ago that encourages the private sector to invest in the senior care industry. The Chinese government realizes that it needs help from the private sector to build enough senior care facilities to meet demand in a timely manner,” says Dr. Feng.

Nor is this simply an issue of accommodation. As people age, they are at greater risk of illness and infirmity. There are an estimated 36m elderly Chinese who need living assistance due to health problems and another 9m Chinese with dementia. The real number might be higher as the diagnosis is sometimes difficult. In 2010, there were an estimated 114m elderly Chinese with diabetes. These are all chronic diseases that need long-term care.

Who is going to pay for this care? Retirement funds and public pensions have only recently been introduced into China and although they have become more popular in recent years, China’s aged must live on much less than their counterparts in more economically developed countries. Despite having one of the world’s largest economies, China is not yet wealthy enough to finance the welfare of its rapidly ageing population.

Nor is it simply a question of building more facilities; the lack of a professional elderly care workforce represents an urgent challenge, as it is easier to build facilities than to find experienced, qualified staff that are both reliable and affordable.

A related challenge is to plan and develop a viable long-term care financing system as soon as possible, without which it is difficult to sustain the senior care sector. In most existing facilities, residents pay privately for their care, which is often beyond the means of even most middle-class people and certainly those in the low income bracket. For now at least most elderly parents will have no choice but to stay with their kids – if they can.

Those that can afford it will try to save more actively for their own retirements. Many will want to follow the Western model of taking out retirement savings plans to cover for the lack of government pensions. However, this will be yet another expense, alongside the cost of educating their children, putting them through college and looking after their more general health care costs. Already Chinese tend to save rather than spend, which slows down the circulation of capital and hence reduces the growth rate of the economy.

There is still a long way to go before China can comfortably provide beds for all, or even the majority, of its elderly population. Without rapid growth, there simply won’t be enough places in care homes to look after the older generation.

Despite the present state of the industry, Dr. Feng believes the future is positive for senior care:“There will be even more nursing homes emerging in China in the coming years, for sure. The government is very much encouraging the development of all kinds of residential care facilities and home and community based services. It encourages greater involvement of the private sector. It has to provide more incentives to make this work. Importantly, it should consider putting in place an effective and enforceable regulatory system for quality assurance, which remains low on the current policy agenda.”

Central government in China recently released new guidelines regarding elderly care; though vague, they highlight the possibility of local governments engaging in deals with private companies. But while China’s economy continues to grow rapidly, whether it will be able to allocate enough income to meet these rising health care costs remains a major concern.

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