Abstract

The aim of this paper is to present projections of public expenditure on health care and long-term care for the elderly, in view of ageing populations, undertaken by the Working Group on Ageing of the European Economic Policy Committee and presented to the ECOFIN Council in 2001. These projections cover almost all of the fifteen EU Member States, and make initial projections of expenditure for the first half of the current century (2000-2050). The expenditure projections were produced using a common methodology, a common demographic projection and commonly agreed macroeconomic assumptions. Projections of health care expenditure and long-term care expenditure were run separately in order to analyse the implications of ageing for the two different expenditure components. In summary, the projections reveal that the impact of ageing for public finances, from increased public expenditure on health and long-term care, is likely to be significant in the first half of the current century. The results of the projections are to be understood as reflecting the impact of future demographic changes on overall levels of health and long-term care expenditure – one way of interpreting the projections is to treat them as a picture of what expenditure levels would be today if we had the demographic com- position of future years. As such, these numbers are subject to both upside and downside risks. Upside risks stem from the fact that key non-demographic drivers of health and long-term care expenditure are not explicitly modelled in the projections. Moreover, assumptions for the developments of expenditures per head are mostly lower than those that would be predicted from long-term historical trends. Downside risks stem from the fact that the relationship between age and health status, and thus age and care needs, is likely to change over time.

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