Tackling the rising cost of elderly care

MOST Malaysians are dealing with one problem or another. Generally, the consensus surrounds money and it is only going to get tougher in the years ahead.

One issue that is relevant to this predicament has been elderly care.

Many people do plan for the upbringing of their children, but rarely factor in the cost of taking care of their elderly parents.

After all, our parents have been the providers all of our lives, but the understanding of taking care of them one day will be a subject that will be visited with greater intensity in the future.

However, the future, depending on the generation, has arrived, and in some cases, what has happened to our aged parents is brutally unfair.

There have been cases in the news where mentally impaired elderly parents have been left wandering the streets, abandoned by their children and in-laws only to become a burden for the government or a non-governmental organisation (NGO) to intervene.

This is why the government is drafting the Senior Citizens Bill, which will compel children to provide care for their elderly parents or face punitive punishment. Other countries like Singapore do have similar legislation.

The reality is a number of elderly parents will be handicapped by a meagre pension or low level of savings in their Employees Provident Fund (EPF) account.

The benchmark savings threshold that the EPF has curated – from basic savings of RM390,000 to enhanced savings of RM1.3mil with adequate savings of RM650,000 – is designed to factor in what some would categorise as healthy individuals.

It has been reported that 61% of active EPF members’ savings do not hit even the lower targets for their age group.

With non-communicable diseases on the rise as result of poor lifestyle choices such as diabetes – which around 20% of Malaysians are afflicted with and a large percentage who don’t even know of their medical condition – this is a time bomb waiting to go off in terms of elderly healthcare costs.

According to a report, about 8.4% of the local population – or 2.9 million people – are aged 65 and above.

Malaysia is projected to be an aged nation in the next 10 years where the number of people aged 65 and above is going to be more than 15%.

The report says only 15% of those above 60 are ageing well, indicating a big burden on healthcare expenses in the future.

Medical inflation is projected to reach 16% in 2026 and there is little confidence that it will be brought under control, given the uptrend over the past number of years.

Inflation is a compounded effect, hence raising healthcare costs dramatically in the future.

Such inflation will only chip away at the cost of care and put a strain on children of sick parents.

The other drag on the cost of elderly care is how with fewer births being recorded, the burden of caring for both sets of paternal and maternal parents of a couple will fall on their children.

As Malaysians live longer and with fewer children seen in families of Generation X and below, the burden of support will fall considerably on the “sandwich generation” – the generation between grandparents and children, mainly working adults.

With legislation on the way to tackle aged care, the issue the sandwich generation will have to deal with the most is the cost of elderly care and raising their children.

The cost of raising children keeps going up every year, putting a strain on family finances that has to be divided between the generations.

While not as expensive as medical costs, the inflation rate for elderly care has been higher than the rate of inflation.

At 3.2%, the rate of inflation of elderly care will only rise as demand for such services increases as more Malaysians age.

Right now, the conventional thinking as Asians is that our children will take care of us in our golden years.

According to one report, nearly a third of urban Malaysians expect their children to support them financially in their old age, but a quarter of those polled fear they will be a burden to their children.

While nearly nine in 10 hope to rely on their savings to fund their retirement, the fact is a lot of Malaysians are facing a retirement crisis.

Their savings are simply insufficient to cater to the longevity that follows post-retirement.

Children, on the other hand, feel they have an overwhelming filial responsibility towards their parents.

The situation will only become more acute for the sandwich generation going forward.

There are measures being instituted by the government in terms of welfare payments and tax reliefs for taxpayers to lessen some of their burden.

However, that will be insufficient in the long run, given the declining tax base and also the tax burden of providing increased welfare payments.

Maybe the best idea, which people will have to accept, is a long-term care insurance programme like what Japan has in place.

In Japan, those aged 40 and above pay a mandatory insurance premium where the cost of elderly care is shared between the payee and the government in their golden years.

This reduces the overwhelming burden of elderly care on the sandwich generation and also the government.

While this method can be construed as a tax on income, it really is about securing sustainable means of providing care for an aged society.

One way to blend such insurance in is to also increase the retirement age so Malaysians can work for longer and pay for such an insurance scheme.