No offense but have you ever talked with holocaust survivors? These folks often won't even interact with government services that require identification.
Sounds like it won't work for them. Further I think you can't be buried in a Jewish cemetery with tattoos. It will work for lots of other people though.
Holocaust survivors are a infinitesimal minority among elderly people, it's pretty much a non-consideration. There are probably more people with tattoo dye allergy if you want to go down that alley.
Amazingly, I find there were 161 thousand in Israel as of last year. I would have thought age would have taken a lot more of them by now--but with an average age of 85.5 they're dropping rapidly.
I do agree it's not an issue overall, whatever you do won't cover everyone anyway and any large-scale system takes a while to deploy--there will be a lot less by the time it's ready to use.