A famous saying in both politics and business is “demographics are destiny.” Demographics provide a picture of what a society looks like today and can also be used to understand trends that change a population over time.
A good example of the way that demographics can change a society is in the generation born after World War II. After the declining birthrates of the 1930’s, there was a huge increase in family growth as soldiers returned home. More than 50 years ago, Business Week coined the phrase “Baby Boomers” to describe the twelfth, and largest, generation born in America of 77 million who’ve been since then called the “love generation,” “me generation,” and as they enter retirement, “the Gray Tsunami.”
The Gray Tsunami heralds the next transformative change in our country’s demographics, this time tilting the mix toward a much older average. In 1950 the percent of the population of the United States aged 65 and older was 8.1 of the total population. In 2010 that percentage increased to 12.8. It’s projected that over 26% of the population of the U. S. will be 65 or older by 2030 while the 18 and under population won’t grow at all.
This shift to an older average demographic will have a large impact, because older and younger Americans consume very different types of healthcare.
From the 1950’s and into the 1990’s, the Baby Boomer generation was mostly patients of ‘acute care’ or shorter-term treatment for a specific injury or communicable disease. Now, the population aged 65 and older are primarily patients for ‘chronic care’ which is ongoing long-term treatment for persistent medical conditions. Additionally, 60% of this group is receiving treatment for four or more chronic conditions including diabetes, hypertension, and pulmonary disease.
This shift will have a huge impact on the U.S. healthcare system because chronic care is more expensive to deliver than acute care.
- Today, U.S., patients 65 and older only account for 12.8% of the total population.
- That age group already accounts for over 34% of total healthcare spending due to their need for chronic care treatment of cardiac, diabetic and obesity conditions.
- By 2020, forecasts predict that 50% of the U.S. population will require treatment for chronic conditions; and
- Expenditures will grow to 80% of healthcare costs.
To meet this challenge, care will have to be delivered in different ways and in different places. Healthcare supply chains will need to adapt to meet the needs of the changing healthcare system. The logistics supporting pharmaceuticals, medical equipment and healthcare supplies will require greater flexibility as care delivery evolves. It will become increasingly important to optimize supply chains for direct-to-clinic, direct-to-pharmacy, and even direct-to-patient material flows to effectively and economically serve the increasing chronic care needs of our aging population.
It’s important to note that the U.S. is not alone in facing these changes and challenges. Nearly all developed countries are facing a similar ‘gray tsunami’. Singapore now has the oldest average population, but it’s followed by graying populations in the United Kingdom, Germany, France, and China. For much of the world, the aging demographic points to significant changes in healthcare destiny.
Will your healthcare business ride the gray tsunami, or be capsized by it?
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