Covid-19: Senior citizens, the worst sufferers

Who are the worst sufferers in the current Covid-19 situation? The plight of migrant workers is all too well known and has attracted a lot of media attention.

Possibly, senior citizens belong to the next worst category. The case of senior citizens is a bit different from the migrant workers. Away from the media glare, they suffer within the confines of homes, without being visible on the roads or rail tracks trudging hundreds of miles with heavy loads or small children on their backs and shoulders evoking sympathy all around.

These senior citizens have a much greater susceptibility to Covid-19 infection and death, compared to people from other age groups, because of their already weakened health. After the gradual withdrawal of lockdown, they are becoming even more vulnerable as asymptomatic younger members of the household have now started to go to workplaces outside, with a higher risk of carrying back infection to their older family members.

Out of fear, the senior citizens remain confined at home without their minimum quota of physical exercises like walking or going to the park. Unlike the younger generations, they are not tech-savvy to interact with friends through social media and hence suffer more from loneliness.

Those living without any support of younger family members have no option but to go out for their daily chores (like shopping for groceries or medicines) inviting the additional risk of contracting infection. Because of social distancing norms, their wait at stores and pharmacies is also much longer than before increasing their hardships. Many of them are further burdened as the supporting helpers (like maids and cooks) are abstaining from work.

People unfortunate enough to die in hospitals suffer the trauma and the indignity of dying alone in hospital beds as relatives and friends are not allowed to see them and whose last rites are not even performed properly.

Without explicitly spelling out, policymakers - using the social cost-benefit calculus which values a person’s life at his potential earnings over the rest of his lifetime (a measure of the person’s social productivity) - would also be tempted to save a young person’s life over a senior citizen’s when deciding on whom to give a bed or ventilator support in a situation of overstretched hospital facilities.

The health insurance cost is becoming prohibitively expensive for senior citizens at a time of their lives when their medical needs are greatest. For example, two 70+ members of a family have to shell out more than Rs. 60,000 per year to get a megre Rs 3 lakh medical cover each.

Even with medical insurance, they usually have to bear 20-30% of hospital bill out of their pockets, as insurance does not cover all expenses. This is after undergoing the hassles and harassment from the insurance companies to reimburse expenses on all kinds of pretexts.

Unlike the poor, the so-called middle-class senior citizens are not eligible for the much-vaunted Ayushman Bharat scheme which presumably gives a family cover of Rs 6 lakh per year.

All these are coming at a time when the bank interest rates have been steadily falling. Senior citizens who depend on interest income from bank fixed deposits, instead of inflation-indexed pensions, are getting their income squeezed more and more.

There is a misconception here, even among economists. It is argued that real interest rates (equal to nominal interest rates minus inflation) have not fallen, when along with reduction in inflation, the nominal interest rates are also being cut equally.

Hence, there would be no adverse impact on interest earners. This argument is invalid for senior citizens since consumer prices are rising even when consumer price inflation is falling, unless, of course, we are considering a negative inflation rate (which is not the case in India).

So, for senior citizens, the nominal income from interest earnings is falling while the nominal cost of living as reflected in expenditure on food, house rents, electricity bills and medical costs is rising. Clearly, the standard of living of the senior citizens depending on interest earnings for survival is going down.

Mutual funds

Some may advise the senior citizens to go for mutual funds in a regime of falling interest rates for better returns. For one, mutual funds are subject to market risks, giving highly variable returns even when their average earning over a long period may well be higher than from bank fixed deposits. Senior citizens need steady flow of cash to meet their fixed (or rising) monthly expenditures and cannot afford to invest in mutual funds or gold or real estate.

Even if nothing much can be done to redress the manifold hardships of the senior citizens, a couple of steps can be immediately taken to reduce their financial burden to some extent.

One, make all senior citizens eligible for government-provided Ayushman Bharat medical insurance scheme. If some more affluent senior citizens prefer to opt out of this scheme, the choice should be left to them.

Second, the overall cap of the Senior Citizen Savings Scheme (SCSS) - which gives somewhat higher interest rates than bank fixed deposits - should be raised from the current Rs 15 lakh to say, Rs 25 lakh.

Since only documented senior citizens can avail of this scheme, there is no risk of misuse by others. The fiscal burden of financing the additional cost - equal to the interest rate differential between SCSS and bank FDs multiplied by additional Rs 10 lakh over the lifetime of the senior citizen - would not be much, specially as part of the taxable interest income would come back to the exchequer.

Given that people in higher income brackets will have to pay more taxes, the net benefit to the poorer senior citizens would be proportionately more, making it a ‘progressive’ subsidy.

(The writer is a former Professor of Economics, IIM-Calcutta and Cornell University, USA)