A dynamic parameterization modeling for the age-period-cohort mortality
1 Moving from a dynamic cohort microsimulation model to a dynamic population microsimulation model...
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1 Moving from a dynamic cohort microsimulation Moving from a dynamic cohort microsimulation model to a dynamic population microsimulation model to a dynamic population microsimulation model model: an incremental approach for a UK model of long-term care charging (CARESIM) Ruth Hancock and Marcello Morciano Health Economics Group, Faculty of Health, University of East Anglia, UK Chris Curry Pensions Policy Institute, UK Raphael Wittenberg and Linda Pickard Personal Social Services Research Unit, London School of Economics, UK ESRC Microsimulation Seminar Leeds, 2 nd July 2009
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Moving from a dynamic cohort microsimulation model Moving from a dynamic cohort microsimulation model to a dynamic population microsimulation modelto a dynamic population microsimulation model:
an incremental approach for a UK model of long-term care charging (CARESIM)
Ruth Hancock and Marcello Morciano Health Economics Group, Faculty of Health, University of East Anglia, UK
Chris Curry Pensions Policy Institute, UK
Raphael Wittenberg and Linda PickardPersonal Social Services Research Unit, London School of Economics, UK
ESRC Microsimulation SeminarLeeds, 2nd July 2009
2
BackgroundIn the UK• Long term care (LTC) system is under debate• Pension reforms may affect ability of future pensioners to pay for
care• Population ageing affects public expenditure on LTC and
pensions • LTC and pension reforms can have significant distributive effects• MAP2030 is using simulation models of LTC finance and
charging, disability, kinship etc. to address these issues• This presentation describes:
– The incremental approach used to ‘refresh’ CARESIM– Preliminary outputs– Limitations and next steps
3
CARESIM:a microsim. model of LTC charges for older people in UK
• Uses (a pooling of) 3 representative cross samples of the UK population (Family Resources Survey)
• In the base year, simulates income tax liabilities for the whole sample; means-tested benefits and care charges for 65+ [static tax/benefit model]
• ‘Ages’ the sub-sample of people aged 65+, to simulate taxes and benefits for older people and their liability for care charges in future years [dynamic cohort microsimulation model]
• Weights applied to adjust sample of older population to represent older population in receipt of care services. Weights are provided by PSSRU macro model of long term care demand and finance.
4
Limitations of CARESIM if sample not refreshed
• after 20 years from the base year, simulations valid for only those aged 85+
• beyond base year, not possible to model any tax revenue raising options which would apply to under 65s
• not possible to include social security benefits for carers of older people if they are under 65
5
The proposed incremental approach
Aims to:• simulate care charges for all those who will be aged 65
and over in up to 20 years from the base year • extend the time horizon of the care charging simulations• model the availability of informal carers of sample
members aged 65+ in the output year and their entitlements to adult carers’ social security benefits
• simulate income tax liabilities for the whole adult population for the same time horizon
6
Adding new cohort of people now aged 45-64
05
101520253035404550556065707580859095
100
2007 2012 2017 2022 2027 2032 2037 2042 2047
simulation year
ag
e
NEW sample members ACTUAL sample members
+
Need to simulate pensions & retirement
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UK Pensions System1.1. PublicPublic: provides basic provision
– the Basic State Pension (BSP);– Means testing benefits: Pension Credit; Housing Benefit; Council Tax Benefit;– Disability and other minor benefits.
2.2. PublicPublic: earnings-related pensions Graduated Retirement Benefit, State Earnings Related Pension Scheme, Second State Pension.
3.3. PrivatePrivate: voluntary arrangements not directly funded by the State– Individual arrangements – defined contribution– Employer-sponsored pension schemes, including occupational
(employers’) pension schemes – defined benefit and defined contribution
Recent reforms:• State pensions: Earnings-link the level of Basic State Pension (BSP), limit
the spread of means testing, raise state pension age • Private pensions: Auto-enrol most employees into saving for a private
pension, Compel employers to contribute (if the employee does not opt-out), introduce a national system of Personal Accounts, to operate alongside existing provision
8
UK Long-Term Care Policy
• LTC funded through mix of state and private resources• State support is subject to means tests which vary
between Scotland, England and Wales and are different for residential and care at home
• Royal Commission on LTC recommended that nursing & personal care should be available without a means test
• Free nursing care implemented throughout the UK but free personal care only in Scotland
• Means tests continue to be a source of discontent• Wanless review of social care suggested a new
partnership model of paying for LTC• Green Paper expected in June July
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The structure of the new routine20072007
BaseSample
FutureFuturePastPast
Individual i has worked as FT/PT or woman has
had children?
Yes
DE-AGEINGRetrospective construction of
working careers; accumulation of credits for state pensions
Individual i has reached SPA ?
Yes
Simulate Pension Incomes
No
FUTUREProspective simulation of
working careers and accumulation of pension rights
No
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Share of unemployed/inactive by age and cohort of birth: male and female
[2008-2027]
Male
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
age
before 1950 1951 - 1955
1956 - 1960 after 1961
Female
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
age
before 1950 1951 - 1955
1956 - 1960 after 1961
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Pension outcomes
Average amount of public and private pension(s) for the new retirees by year of retirement and gender
Male
BSP
SERPS/S2P
0
50
100
150
200
250
300
350
400
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
year of retirement
£ p
er w
eek,
200
7 p
rice
s
Public Private
Female
BSP
SERPS/S2P
0
50
100
150
200
250
300
350
400
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027
year of retirement£
per
wee
k, 2
007
pri
ces
Public Private
Note: Analysis based on the flow of new pensioners in receipt of an amount >= £10 pwWe do not consider means-testing benefits
Reduction of gender gap, mainly due to the role of public pension
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Consequences for distributional analyses of reforms to care charging
Two aspects considered here:• Comparing 2007 and 2027, for 65+ rather than 85+ • Classifying by 65+ income distribution rather than age
group specific income distribution
Two reforms:• ‘free personal care’ – flat rate non means-tested subsidy
to care in a care home, care at home free of charge • Housing wealth disregarded in assessing contribution to
care component of care home fee
13
85+ or 65+ ?Distribution of relative total gains: care home residents and home care recipients by age
group specific income quintile , aged 85+
45
89
106
99
158
69
128
146
100
41
7174
83
110
172175
146
105
53
9
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
Q1 (lowest) Q2 Q3 Q4 Q5 (highest)
Age group specific income quintile
Rela
tive g
ain
(overa
ll gain
=100)
Free personal care, 2007 Housing Disregard, 2007
Free personal care 2027 Housing disregard, 2027
Distribution of relative total gains: care home residents and home care recipients by age group specifc income quintile, aged 65+
40
86
101 103
163
69
134
143
98
33
7267
81
109
162
147
130
102
77
53
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
Q1 (lowest) Q2 Q3 Q4 Q5 (highest)
Age group specific income quintile
Rela
tive g
ain
(overa
ll gain
=100)
Free personal care, 2007 Housing Disregard, 2007
Free personal care, 2027 Housing disregard, 2027
14
Age specific or 65+ income distribution ?
Distribution of relative total gains: care home residents and home care recipients by 65+ income quintile, aged 65+
42
9399
109
171
72
150
132
83
7
54
48
61
89
148
94
129124
157
40
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
Q1 (lowest) Q2 Q3 Q4 Q5 (highest)
Income quinitle, 65+ population
Rela
tive g
ain
(overa
ll gain
=100)
Free personal care, 2007 Housing Disregard, 2007
Free personal care, 2027 Housing disregard, 2027
Distribution of relative total gains: care home residents and home care recipients by age group specifc income quintile, aged 65+
40
86
101 103
163
69
134
143
98
33
7267
81
109
162
147
130
102
77
53
0
20
40
60
80
100
120
140
160
180
200
220
240
260
280
Q1 (lowest) Q2 Q3 Q4 Q5 (highest)
Age group specific income quintile
Rela
tive g
ain
(overa
ll gain
=100)
Free personal care, 2007 Housing Disregard, 2007
Free personal care, 2027 Housing disregard, 2027
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Conclusions
• Restricting the analysis of those 85+ is not as limiting as it may seem at first
Limitations
… and next steps
• Extending time horizon of the analysis (up to 2050)• Eventually add cohorts under age of 45 so that ultimately simulate
carers benefits for under 65 carers of people aged 65+ and ultimately simulating income tax liabilities for the whole adult population for the same time horizon
• Much more validation and sensitivity analysis needed• Range of events simulated for the new cohort needs to be extended
(e.g. divorce and (re)marriage decisions)
