On 12 May the European Commission published The 2015 Ageing Report, which presents economic and budgetary projections for the 28 EU member states for the period 2013-2060.
Though the total population is set to grow relatively steadily, the old-age dependency ratio – the number of people aged 65 or over relative to those aged 15-64 – is expected to almost double by 2060. Whereas there are currently four working-age persons for every one person over 65, this would mean a drop to only two working-age people for every over-65.
The projections are long-term, but it is expected that their fiscal impact and pressure upon public finances will be felt in the next decade. The anticipated change in ‘strictly age-related’ expenditure (which includes pensions, healthcare, long-term care and education) is almost two per cent of GDP in the period to 2060 – these costs are mostly driven by health and long-term care.
What are the expected implications for health and long-term care?
The Report states that the slowing of health care expenditure seen in the post-crisis period is expected to be temporary and that spending is likely rise in coming years. It examines the link between healthcare spending and the demographic structure of the population, the health status of the population, individual and national income, health technology and the legal/institutional setting of the member state concerned. A difference in the challenges faced by EU15 and new member state (NMS) countries is identified in the Report, with the latter likely to see more profound demographic changes and greater impact from demand- and supply-side factors.
Spending on long-term care is also set to rise and the Report assesses the effect of demographic ageing, changing dependency levels and health status, models of provision and coverage and variations in care supply. In its main reference scenario, the report finds that spending on long-term care is likely to increase by 67 per cent by 2060, reaching 2.7 per cent of GDP. The need to extend formal coverage to a greater proportion of the population and the increasing demand for access to care suggests that pressure upon public finances will continue to rise.
Council conclusions on the Report
In its conclusions the Council of the EU endorsed the Ageing Report and urged a prompt implementation of the relevant country specific recommendations in order to address the economic and budgetary consequences of ageing. It also advised member states to undertake performance assessments of health and long-term care systems and instigate the necessary reforms to ensure the future sustainability of care.
Why is the Report important and what is it used for?
This is the fifth Ageing Report to be produced by the Commission since 2001. It feeds into policy debates including the Europe 2020 Strategy, the European Semester and the assessment of the stability of public finances required under the Stability and Growth Pact. It is also used in broader analyses of the labour market and policy to enhance economic growth. It is written by the Directorate General for Economic and Financial Affairs (ECFIN) and the Economic Policy Committee (EPC), and is supported by the latest population projections compiled by Eurostat (EUROPOP2013).
The full text of the Report can be found here.
The Council conclusions can be found here.