Health and healthcare: how to square the circle? ( 757,71 KB )

 

  Spain will have 52 million inhabitants by 2060, of which approximately a third will be over 65 years of age and 14% over 80. The current figures are around 17% and 5%, respectively. In absolute terms, in fifty years the number of Spaniards over 65 will have gone from 8 to 17 million people, and those over 80 will total 8 million, compared with 2 million today. These figures, which come from Eurostat's population projections, are good news. They draw a picture of a country that continues to prosper in terms of life expectancy, a fundamental indicator of human development. However, this undeniably good news may also lead to legitimate concern on how the country's healthcare spending will evolve in the future.

  We all intuitively understand that, on average, the older the person the higher the spending on their healthcare and this assumption is supported by the data: in the countries of the Organization for Economic Cooperation and Development (OECD), per capita healthcare spending for those over 65 is at least four times higher than for those under this age. Consequently, if a country ages, its total healthcare spending is likely to increase. However, this issue can't be dealt with so simply. First, because in addition to ageing per se, a person's state of health in those additional years provided by greater longevity is also important. But also because there are other factors that affect a country's healthcare spending that are not strictly related to demographic trends, in particular growth in income and the development of new medical technologies.

  With regard to the impact of increasing longevity, we must ask ourselves what quality of health we can expect for the additional years of life enjoyed in 2060. In general terms, three different situations might occur. The first, which the literature calls «compression of morbidity», claims that people will not only live longer but healthier, i.e. the number of years lived in illness will decrease. The opposing hypothesis («expansion of morbidity») has also been proposed: we will live more years in worse conditions of health. Lastly, an intermediate position proposes a balance between living longer and better (in health terms), i.e. that some years «gained» due to longer life expectancy will be lived healthily but the rest not. The empirical evidence available, although not entirely conclusive, suggests that the recent trend in the OECD is in line with a scenario in which the years «gained» in terms of life expectancy are healthy years. This has a neutral effect in terms of its impact on the healthcare spending per inhabitant, as the number of years of bad health remains constant.

  Finally, another group of factors are those that are not strictly demographic. The relationship of healthcare spending with income level and the development of medical techniques usually come under this category. In the first of these cases, current empirical literature on the relationship between income and healthcare spending in the European Union (EU) tends to suggest that healthcare spending grows, on average and over the long term, faster than the rise in income. With regard to technology, the evidence points towards the acceleration in the cost of new medical developments and treatments as a key factor behind the rise in healthcare spending. According to the most customary interpretation, this is due to the fact that the very availability of new treatments (usually more expensive than the existing ones, largely a result of the high research and development costs involved) generates a demand for them. Institutional aspects of the different national health systems might also be important, such as the distribution of public-private functions or the incentive system for suppliers and prescribers of medical products.

  What is the relative weight of each of these factors that determine healthcare spending? According to OECD estimates, in the period 1981-2002, the average annual rise in healthcare spending (expressed in per capita terms) of its member countries was 3.6%. Purely demographic effects (ageing and change in health status due to greater longevity) account for 0.3 percentage points, the effects of higher income, 2.3 percentage points, and the change in medical techniques, one percentage point.

  The relevant question to ask is how these determining factors will evolve in the future, both demographic and non-demographic, for healthcare spending in Spain and its neighbouring countries. A recent EU study offers some clues in this respect.(1) According to these projections, healthcare spending in the Union as a whole would go from levels equivalent to 6.7% of the gross domestic product (GDP) in 2007 to 8.2% in 2060. Nonetheless, this aggregate result comes from disparate national trends. In general terms, the new member states of the EU, those from Eastern Europe, will see the highest increases in healthcare spending, a result of the combination of a quickly ageing demographic and a relatively lower starting point.

  The Spanish case tends to resemble the situation of Eastern Europe due to its fast ageing and relatively low healthcare spending as a starting point. Healthcare spending, which accounted for 5.5% of GDP in 2007, is expected to rise to 7.2% by 2060. This rise occurs in three, clearly distinct stages. Up to 2020, demographic pressure and that of other factors is relatively contained. In 2020, and always according to the EU projections, healthcare spending would account for 5.9% of GDP. The following two decades will see the greatest pressure on healthcare spending: by 2040 this will reach 6.8% of GDP. Afterwards there will be two decades of a more contained rise so that, by 2050, healthcare spending would have reached 7.1% of GDP, only adding one tenth of a percentage point by 2060.

  Although this exercise is highly uncertain, it has the virtue of pointing out when the current trends, if they continue, will exert the greatest pressure on healthcare spending. Given that the timescale and trend for Spain is similar to the one expected for the Union as a whole, we know that, if we want to contain healthcare spending, we should act quickly in order to avoid reaching the critical period of 2030-2040 without any room for manoeuvre. Especially because relatively moderate improvements in the initial situations are going to lead to great changes in the long-term. If, as the Chinese sage, Lao Tse, once said, «a journey of a thousand miles starts with a single step», then we should take our first few paces without losing sight of a future that may seem distant in personal terms but is extremely close in historical terms.

  (1) European Commission (2009): «2009 Ageing Report: Economic and budgetary projections for the EU-27 Member States (2008-2060)», European Economy, 2.

  This box was prepared by Àlex Ruiz International Unit, Research Department, "la Caixa"

---

All documents are in Adobe Acrobat format (PDF).
To view a document in PDF format you need the Adobe Acrobat Reader. If you don’t have it already loaded on your computer, you can donwload it now.