Population ageing and health financing: A method for forecasting two sides of the same coin

Abstract

Abstract There is a perception that population ageing will have deleterious effects on future health financing sustainability. Given the positive association between health care utilization and increasing calendar age, many analysts assume population ageing will result in considerable growth in health spending. Since this expenditure tends to be sourced primarily from public funds, there is great policy interest to quantify how population ageing is likely to affect health expenditure trends. We propose a new method-the Population Ageing financial Sustainability gap for Health systems (or alternatively, the PASH)-to explore how changes in the population age mix will affect health expenditures and revenues. Using a set of six countries in Europe and the Western Pacific representing a diverse range of health financing systems (Australia, Bulgaria, Japan, Slovenia, United Kingdom, Vietnam), we forecast the size of the ageing-attributable gap between health revenues and expenditures from 2020 to 2100 under current health financing arrangements. The largest gap by 2100 is expected to be in Vietnam, where the gap between revenues and expenditure is expected to increase by around $170 per person in 2018 PPPs or 2.3% of GDP; 87.1% of this increase is due to expected growth in expenditures. In Slovenia, where the gap is forecast in line with the forecast for Japan (the oldest country in the world), nearly half of the gap (44.2%) is due to reductions in revenue generation. All countries face some health financing gap due to ageing under current financing arrangements. The PASH analysis highlights the wide range of policy options available to manage health financing as the population ages, such as changing sources for health revenues and reducing expenditure by promoting healthy ageing.