Unhealthy outlook

OECD Observer

Click to enlarge. Source: OECD

The public cost of health and long-term care in OECD countries will double by 2050 if current trends continue, a new OECD report finds. The rising medical demands of ageing and wealthier populations could send average health costs in the OECD area up from 6.7% of GDP to 12.8%. Even if governments manage to contain that rise, spending would still reach the equivalent of around 10% of GDP by the middle of the century.

Ageing populations are not the only pressure on healthcare spending. Advances in medical technology and a rapid spread in health services will also push up costs, because even where new technology brings down the cost of individual treatments, demand for those treatments will rise.

In a worst-case scenario, if current trends persist, countries like Iceland, Norway and Ireland could see their health burdens rise as high as 15.2%, 15% and 14.5% of GDP, respectively. Conversely, even if cost increases are eventually brought back in line with income growth, ageing populations could still cause the proportion of health spending to leap from 6.6% to 10.7% in Italy, 6.9% to 10.9% in Japan and from 5.6% to 9.6% in Spain. Even if these increases reflect contemporary choices about the importance of healthcare allocations in public budgets, governments will nevertheless be compelled to manage those costs to make them sustainable.

See “Projecting OECD health and long-term care expenditures: What are the main drivers?”, OECD Economics Department Working Paper No. 477, February 2006, available at www.oecd.org/eco.

©OECD Observer No 255, May 2006

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