July 01, 2004

The Impact of Ageing on Health Care Expenditures: Impending Crisis or Misguided Concern?

Author: Meena Seshamani
ISBN: 1 899040 97 8
Publisher: Office for Health Economics

Price: £12.50

The Impact of Ageing on Health Care Expenditure: Impending Crisis or Misguided Concern? by Meena Seshamani challenges the long held belief that as the average age of populations increases so health expenditures will rise in direct proportion. Meena Seshamani’s original analysis of English data shows that proximity to death is a much stronger predictor of future hospital expenditure than age alone. Additional years of life are lived in health, not disability. Only the last year or two of life significantly increases health care costs per capita, whether at 65 or 75 years of age.

The ageing of national populations has accelerated in the past few decades. It is estimated that 40 to 60% of public spending is sensitive to this changing age structure. Health care providers are concerned with the profound impact this will have on societies and economies.

Traditionally older populations are high users of health care relative to the rest of the population. Per capita expenditure for those aged 65 and over was on average 3.7 times greater than for those aged under 65 (OECD, 1993). It therefore seems logical to expect an ageing population will substantially increase health care costs. Indeed since 1970 GDP expenditure on health care among OECD countries has risen from a population-weighted average of 5.7% to 9.9%, with the UK at 6.9% and the US at 12.9%.

However using age specific expenditures for Hospital and Community Health Services (HCHS) and Family Health Services (FHS) in England and Wales, Meena Seshamani finds “a compression of morbidity” effect – people are living longer, but healthier lives. Her proximity to death findings show:

  • age is insignificant in explaining health care expenditure once proximity or time to death is accounted for
  • estimated increases in national hospital expenditure due to ageing can be halved
  • expenditure effects of increased life span after the age of 65 are small
  • most age-related increases in hospital expenditure observed to date are due to the numbers of post WWII baby boomers

For ordering information go to OHE

July 1, 2004 12:56 PM