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Can we afford to live longer in better health?

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Author Info
Ed Westerhout ()
Frank Pellikaan
Abstract

This document analyses the effects of ageing populations upon public finances. More specifically, it focuses on the implications of ageing for acute health care, long-term care, and public pension expenditure. It does so for 15 EU countries. It pays particular attention to three novel insights: It adopts a generational accounting model that incorporates health care costs during the last years of life, decomposed into an acute health care component and a long-term care component.

The projections show that gains in life expectancy increase age-related expenditure; better health has the opposite effect. Combined, these trends reduce health care expenditure and increase pension expenditure. Their joint effect upon public finance is rather modest, however. Hence, the assessment of public finances in most EU15 countries does not change: even if a faster increase in life expectancy should combine with an improvement in health, current fiscal and social security institutions are unsustainable.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Documents with number 85.

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Date of creation: Jun 2005
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Handle: RePEc:cpb:docmnt:85

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Related research
Keywords: ageing populations; fiscal sustainability;

Find related papers by JEL classification:
H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
I10 - Health, Education, and Welfare - - Health - - - General
J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends and Forecasts

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Vaupel, James W, 1998. "Demographic Analysis of Aging and Longevity," American Economic Review, American Economic Association, vol. 88(2), pages 242-47, May. [Downloadable!] (restricted)
  2. Thai Than Dang & Pablo Antolín & Howard Oxley, 2001. "Fiscal Implications of Ageing: Projections of Age-Related Spending," OECD Economics Department Working Papers 305, OECD, Economics Department. [Downloadable!]
  3. Seshamani, Meena & Gray, Alastair M., 2004. "A longitudinal study of the effects of age and time to death on hospital costs," Journal of Health Economics, Elsevier, vol. 23(2), pages 217-235, March. [Downloadable!] (restricted)
  4. Robert W. Fogel, 1994. "Economic Growth, Population Theory, and Physiology: The Bearing of Long-Term Processes on the Making of Economic Policy," NBER Working Papers 4638, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Jonathan Gruber & David A. Wise, 2002. "Social Security Programs and Retirement Around the World: Micro Estimation," NBER Working Papers 9407, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Sally C. Stearns & Edward C. Norton, 2004. "Time to include time to death? The future of health care expenditure predictions," Health Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 315-327. [Downloadable!]
  7. David M. Cutler & Louise Sheiner, 1998. "Demographics and Medical Care Spending: Standard and Non-Standard Effects," NBER Working Papers 6866, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Kathleen McGarry, 2004. "Health and Retirement: Do Changes in Health Affect Retirement Expectations?," Journal of Human Resources, University of Wisconsin Press, vol. 39(3). [Downloadable!] (restricted)
  9. David M. Cutler & Ellen Meara, 1999. "The Concentration of Medical Spending: An Update," NBER Working Papers 7279, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Borsch-Supan, Axel, 2000. "Incentive effects of social security on labor force participation: evidence in Germany and across Europe," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 25-49, October. [Downloadable!] (restricted)
  11. Darius Lakdawalla & Tomas Philipson, 1999. "Aging and the Growth of Long-Term Care," NBER Working Papers 6980, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ivonne Honekamp & Daniel Possenriede, 2008. "Redistributive effects in public health care financing," The European Journal of Health Economics, Springer, vol. 9(4), pages 405-416, November. [Downloadable!] (restricted)
  2. Casper van Ewijk & Nick Draper & Harry ter Rele & Ed Westerhout, 2006. "Ageing and the sustainability of Dutch public finances," CPB Special Publications 61, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
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