The Drivers of Public Expenditure on Health and Long-Term Care : An Integrated Approach

This paper proposes a framework for projecting public health and long-term care expenditures. It considers demographic and other (non-demographic) drivers of expenditures. The paper extends demographic drivers by incorporating death-related costs and the health status of the population. Concerning health care, the projections incorporate income and the effects of technology cum relative prices. For long-term care, the effects of increased labour participation, reduction of informal care and Baumol's cost disease are taken into account. Using this integrated approach, public health and long-term care expenditures are projected for all OECD countries. Alternative scenarios are simulated, together with sensitivity analysis. Depending on the scenarios, total public OECD health and long-term care spending is projected to increase in the range of 3.5 to 6 percentage points of GDP for the period 2005-2050