Alternative Scenarios for Health, Life Expectancy and Social Expenditure: The Influence of Living Longer in Better Health on Health Care and Pension Expenditures and Government Finances in the EU

ENEPRI Research Report No. 8

104 Pages Posted: 27 Feb 2012

See all articles by Frank Pellikaan

Frank Pellikaan

affiliation not provided to SSRN

Ed Westerhout

CPB Netherlands Bureau of Economic Policy Analysis; Tilburg University - Tilburg University School of Economics and Management

Date Written: June 1, 2005

Abstract

This report investigates the effect of population ageing on public health- and long-term care expenditures, public pensions and government finances in EU countries in the projection period 2002-50. The authors specifically consider new insights about the development of demography and health on these projections. In this regard, the view has been expressed that people may live substantially longer in the future than estimated by current demographic projections and may spend part of these additional years in better health. Both developments have obvious implications for the correct projection of public expenditures and finances. To assess the effects of living longer in better health, four core scenarios are developed: a base case and scenarios for living longer, living in better health and living longer in better health.

The analysis also contains a number of new elements. First, it includes the costs incurred during the last years of life in the projections, which will be postponed by an increase in life expectancy. Hence, the calculations in the study correct for the overestimation of future health-care expenditure that arises when no account is made for mortality-related costs. Second, the cost of mortality is disaggregated into a health- and long-term care component, which differs by age. Third, tax revenues are incorporated into the projections for government finances. With this information, the analysis is able to project government finances in the future and assess whether government finances are sustainable under current social policy rules.

Keywords: life expectancy, social expenditure, health, health care, pension expenditure, government finances, EU

Suggested Citation

Pellikaan, Frank and Westerhout, Ed, Alternative Scenarios for Health, Life Expectancy and Social Expenditure: The Influence of Living Longer in Better Health on Health Care and Pension Expenditures and Government Finances in the EU (June 1, 2005). ENEPRI Research Report No. 8, Available at SSRN: https://ssrn.com/abstract=2011828 or http://dx.doi.org/10.2139/ssrn.2011828

Frank Pellikaan

affiliation not provided to SSRN

Ed Westerhout (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Tilburg University - Tilburg University School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti
Netherlands

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