Advertisement

European Journal of Ageing

, Volume 10, Issue 4, pp 353–361 | Cite as

The effect of population aging on health expenditure growth: a critical review

  • Claudine de MeijerEmail author
  • Bram Wouterse
  • Johan Polder
  • Marc Koopmanschap
Review

Abstract

Although the consequences of population aging for growth in health expenditures have been widely investigated, research on this topic is rather fragmented. Therefore, these consequences are not fully understood. This paper reviews the consequences of population aging for health expenditure growth in Western countries by combining insights from epidemiological and health economics research. Based on a conceptual model of health care use, we first review evidence on the relationship between age and health expenditures to provide insight into the direct effect of aging on health expenditure growth. Second, we discuss the interaction between aging and the main societal drivers of health expenditures. Aging most likely influences growth in health expenditures indirectly, through its influence on these societal factors. The literature shows that the direct effect of aging depends strongly on underlying health and disability. Commonly used approximations of health, like age or mortality, insufficiently capture complex dynamics in health. Population aging moderately increases expenditures on acute care and strongly increases expenditures on long-term care. The evidence further shows that the most important driver of health expenditure growth, medical technology, interacts strongly with age and health, i.e., population aging reinforces the influence of medical technology on health expenditure growth and vice versa. We therefore conclude that population aging will remain in the centre of policy debate. Further research should focus on the changes in health that explain the effect of longevity gains on health expenditures, and on the interactions between aging and other societal factors driving expenditure growth.

Keywords

Population aging Morbidity Technology Health expenditures Acute care Long-term care 

Notes

Acknowledgments

This study was part of the projects “Living longer in good health,” which was financially supported by the Network for Studies on Pensions, Aging and Retirement (NETSPAR), and “Healthy aging and health care expenditure,” financed by the National Institute for Public Health and the Environment (RIVM). We thank two anonymous referees and the editor (Howard Litwin) for their extensive comments on an earlier version of the paper.

References

  1. Andersen R, Newman JF (1973) Societal and individual determinants of medical care utilization in the United States. Milbank Mem Fund Q Health Soc 51:95–124CrossRefGoogle Scholar
  2. Baicker K, Skinner JS (2011) Health care spending growth and the future of U.S. tax rates. NBER working paper no. 16772. Bureau of Economic Research, CambridgeGoogle Scholar
  3. Baumol WJ (1967) Macroeconomics of unbalanced growth: the anatomy of urban crisis. Am Econ Rev 57:415–426Google Scholar
  4. Bird CE, Shugarman LR, Lynn J (2002) Age and gender differences in health care utilization and spending for Medicare beneficiaries in their last years of life. J Palliat Med 5(5):705–712CrossRefGoogle Scholar
  5. Bodenheimer T (2005) High and rising health care costs. Part 2: technologic innovation. Ann Int Med 142(11):932CrossRefGoogle Scholar
  6. Bonsang E (2009) Does informal care from children to their elderly parents substitute for formal care in Europe? J Health Econ 28(1):143–154Google Scholar
  7. Breyer F, Costa-Font J, Felder S (2010) Aging, health, and health care. Oxf Rev Econ Policy 26(4):674–690CrossRefGoogle Scholar
  8. Bunker JP, Frazier HS, Mosteller F (1994) Improving health: measuring effects of medical care. Milbank Q 72:225–258CrossRefGoogle Scholar
  9. Burner ST, Waldo DR, McKusick DR (1992) National health expenditures projections through 2030. Health Care Fin Rev 14(1):1–29Google Scholar
  10. Christensen K, Doblhammer G, Rau R, Vaupel JW (2009) Aging populations: the challenges ahead. Lancet 374:1196–11208CrossRefGoogle Scholar
  11. Cutler DM (2007) The lifetime costs and benefits of medical technology. J Health Econ 26(6):1081–1100CrossRefGoogle Scholar
  12. Cutler DM, McClellan M (2001) Is technological change in medicine worth it? Health Aff 20(5):11CrossRefGoogle Scholar
  13. Cutler DM, Rosen AB, Vijan S (2006) The value of medical spending in the United States, 1960–2000. N Engl J Med 355:920–927CrossRefGoogle Scholar
  14. Cutler DM, Landrum MB, Stewart KA (2008). Intensive medical care and cardiovascular disease disability reductions. In: Cutler DM, Wise DA (eds) Health at older ages. The University of Chicago Press, ChicagoGoogle Scholar
  15. De Meijer CA, Koopmanschap MA, Koolman XH, van Doorslaer EK (2009) The role of disability in explaining long-term care utilization. Med Care 47(11):1156–1163CrossRefGoogle Scholar
  16. De Meijer C, Koopmanschap M, d’Uva TB, Van Doorslaer E (2011) Determinants of long-term care spending: age, time to death or disability? J Health Econ 30(3):425–438CrossRefGoogle Scholar
  17. Dixon S (2003) Implications of population ageing for the labour market. Labour Mark Trends 111(2):67–76Google Scholar
  18. Dormont B, Grignon M, Huber H (2006) Health expenditure growth: reassessing the threat of ageing. Health Econ 15(9):947–963CrossRefGoogle Scholar
  19. Fries JF (1980) Aging, natural death, and the compression of morbidity. N Engl J Med 303(3):130–135CrossRefGoogle Scholar
  20. Getzen TE (2000) Health care is an individual necessity and a national luxury: applying multilevel decision models to the analysis of health care expenditures. J Health Econ 19(2):259–270CrossRefGoogle Scholar
  21. Goldman DP, Shang B, Bhattacharya J, Garber AM, Hurd M, Joyce GF et al (2005) Consequences of health trends and medical innovation for the future elderly. Health Aff 24(Suppl 2):W5R5-17Google Scholar
  22. Häkkinen U, Martikainen P, Noro A, Nihtilä E, Peltola M (2008) Aging, health expenditure, proximity to death, and income in Finland. Health Econ Policy Law 3(2):165–195CrossRefGoogle Scholar
  23. Hall RE, Jones CI (2007) The value of life and the rise in health spending. Q J Econ 122(1):39–72CrossRefGoogle Scholar
  24. Hartwig J (2008) What drives health care expenditure? Baumol’s model of unbalanced growth revisited. J Health Econ 27(3):603–623CrossRefGoogle Scholar
  25. Jones CI (2002) Why have health expenditures as a share of GDP risen so much? NBER working paper no. 9325. Bureau of Economic Research, CambridgeGoogle Scholar
  26. Kildemoes HW, Christiansen T, Gyrd-Hansen D, Kristiansen IS, Andersen M (2006) The impact of population ageing on future Danish drug expenditure. Health Policy 75(3):298–311CrossRefGoogle Scholar
  27. Kramer M (1980) The rising pandemic of mental disorders and associated chronic diseases and disabilities. Acta Psychiatr Scand Suppl 62:282–297CrossRefGoogle Scholar
  28. Lafortune G, Balestat G, Disability Study Expert Group Members (2007) Trends in severe disability among elderly people: assessing the evidence in 12 OECD countries and the future implications. OECD health working papers no. 26. OECD Publishing, ParisGoogle Scholar
  29. Longman P (1987) Born to pay: the new politics of aging in America. Houghton Mifflin, BostonGoogle Scholar
  30. Lubitz J (2005) Health, technology, and medical care spending. Health Aff 24(Suppl 2):W5R81-5Google Scholar
  31. Mackenbach JP (1996) The contribution of medical care to mortality decline: McKeown revisited. J Clin Epidemiol 49:1207–1213CrossRefGoogle Scholar
  32. Mackenbach JP, Slobbe L, Looman CWNL, Van der Heide A, Polder JJ, Garssen J (2011) Sharp upturn of life expectancy in the Netherlands: effect of more health care for the elderly? Eur J Epidemiol 26:903–914CrossRefGoogle Scholar
  33. Madsen J, Serup-Hansen N, Kragstrup J, Kristiansen IS (2002) Ageing may have limited impact on future costs of primary care providers. Scand J Prim Health Care 20(3):169–173CrossRefGoogle Scholar
  34. Manton KG, Lamb VL (2007) Medicare cost effects of recent US disability trends in the elderly: future implications. J Aging Health 19(3):359–381CrossRefGoogle Scholar
  35. Manton KG, Gu X, Lamb VL (2006) Change in chronic disability from 1982 to 2004/2005 as measured by long-term changes in function and health in the U.S. elderly population. Proc Natl Acad Sci USA 103(48):18374–18379CrossRefGoogle Scholar
  36. Martin LG, Schoeni RF, Andreski PM (2010) Trends in health of older adults in the United States: past, present, future. Demography 47(Supplement):S17–S40CrossRefGoogle Scholar
  37. McGrail K, Green B, Barer ML, Evans RG, Hertzman C, Normand C (2000) Age, costs of acute and long-term care and proximity to death: evidence for 1987–88 and 1994–95 in British Columbia. Age Ageing 29(3):249–253CrossRefGoogle Scholar
  38. McKeown TF (1976) The role of medicine: dream, mirage or nemesis. Nuffield Provincial Hospitals, LondonGoogle Scholar
  39. Meara E, White C, Cutler DM (2004) Trends in medical spending by age, 1963–2000. Health Aff 23(4):176–183CrossRefGoogle Scholar
  40. Miller T (2001) Increasing longevity and Medicare expenditures. Demography 38(2):215–226CrossRefGoogle Scholar
  41. Murillo C, Piatecki C, Saez M (1993) Health care expenditure and income in Europe. Health Econ 2(2):127–138CrossRefGoogle Scholar
  42. Murphy KM, Topel RH (2006) The value of health and longevity. J Polit Econ 114:871–904CrossRefGoogle Scholar
  43. Murthy NRV, Ukpolo V (1994) Aggregate health care expenditure in the United States: evidence from cointegration tests. App Econ 26(8):797–802CrossRefGoogle Scholar
  44. Newhouse JP (1977) Medical-care expenditure: a cross-national survey. J Hum Resour 12(1):115–125CrossRefGoogle Scholar
  45. Newhouse JP (1992) Medical care costs: how much welfare loss? J Econ Perspect 6(3):3–21CrossRefGoogle Scholar
  46. OECD (1988) Aging population: the social policy implications. OECD Publishing, ParisGoogle Scholar
  47. OECD (2006) Projecting OECD health and long-term care expenditures: what are the main drivers? Economics department working papers no. 477. OECD Publishing, ParisGoogle Scholar
  48. OECD (2009) Achieving better value for money. OECD Health Policy Studies, ParisCrossRefGoogle Scholar
  49. OECD (2011) Health at a glance 2011: OECD indicators. OECD Publishing, ParisCrossRefGoogle Scholar
  50. Okunade AA, Murthy VNR (2002) Technology as a major driver of health care costs: a cointegration analysis of the Newhouse conjecture. J Health Econ 21(1):147–159CrossRefGoogle Scholar
  51. Okunade AA, Karakus MC, Okeke C (2004) Determinants of health expenditure growth of the OECD countries: Jackknife resampling plan estimates. Health Care Manag Sci 7(3):173–183CrossRefGoogle Scholar
  52. Olshansky SJ, Rudberg MA, Carnes BA, Cassel CK, Brody JA (1991) Trading off longer life for worsening health. J Aging Health 3(2):194–216CrossRefGoogle Scholar
  53. Parker MG, Thorslund M (2007) Health trends in the elderly population: getting better and getting worse. Gerontol 47(2):150–158CrossRefGoogle Scholar
  54. Payne G, Laporte A, Deber R, Coyte PC (2007) Counting backward to health care’s future: using time-to-death modeling to identify changes in end-of-life morbidity and the impact of aging on health care expenditures. Milbank Q 85(2):213–257CrossRefGoogle Scholar
  55. Polder JJ, Barendregt JJ, Van Oers H (2006) Health care costs in the last year of life—the Dutch experience. Soc Sci Med 63(7):1720–1731CrossRefGoogle Scholar
  56. Reinhardt UE (2003) Does the aging of the population really drive the demand for health care? Health Aff 22(6):27–39CrossRefGoogle Scholar
  57. Richardson J, Robertson I (1999) Aging and the cost of health services. Working paper no. 90. Centre for Health Program Evaluation, SydneyGoogle Scholar
  58. Roos NP, Montgomery P, Roos LL (1987) Health care utilization in the years prior to death. Milbank Q 65(2):231–254CrossRefGoogle Scholar
  59. Salas C, Raftery JP (2001) Econometric issues in testing the age neutrality of health care expenditures. Health Econ 10(7):669–671CrossRefGoogle Scholar
  60. Scitovsky AA (1984) The high cost of dying: what do the data show? Milbank Mem Fund Q Health Soc 62(4):591–608CrossRefGoogle Scholar
  61. Serup-Hansen N, Wickstrinm J, Kristiansen IS (2002) Future health care costs—do health care costs during the last year of life matter? Health Policy 62(2):161–172CrossRefGoogle Scholar
  62. Seshamani M, Gray A (2004) Ageing and health-care expenditure: the red herring argument revisited. Health Econ 13(4):303–314CrossRefGoogle Scholar
  63. Shang B, Goldman D (2008) Does age or life expectancy better predict health care expenditures? Health Econ 17(4):487–501CrossRefGoogle Scholar
  64. Simoens S, Villeneuve M, Hurst J (2005) Tackling nurse shortages in OECD countries. OECD health working papers no. 19. OECD Publishing, ParisGoogle Scholar
  65. Spillman BC, Lubitz J (2000) The effect of longevity on spending for acute and long-term care. N Engl J Med 342(19):1409–1415CrossRefGoogle Scholar
  66. Steinmann L, Telser H, Zweifel PS (2007) Aging and future healthcare expenditure: a consistent approach. Forum Health Econ Policy 10(2):1–30Google Scholar
  67. Suen RMH (2005) Technological advance and the growth in health care spending. Economie d’Avant Garde research reports. University of California, RiversideGoogle Scholar
  68. Szreter S (1988) The importance of social interventions in Britain’s mortality decline 1850–1914: a re-interpretation of the role of public health. Soc Hist Med 1:5–37CrossRefGoogle Scholar
  69. Van Doorslaer E, Koolman X, Jones AM (2004) Explaining income related inequalities in doctor utilisation in Europe. Health Econ 13(7):629–647CrossRefGoogle Scholar
  70. Wagstaff A (2009) Social health insurance vs tax-financed health systems: evidence from the OECD. Policy research working paper 4821. World Bank, Washington, DCGoogle Scholar
  71. Weaver F, Stearns SC, Norton EC, Spector W (2009) Proximity to death and participation in the long-term care market. Health Econ 18(8):867–883CrossRefGoogle Scholar
  72. Weisbrod BA (1991) The health care quadrilemma: an essay on technological change, insurance, quality of care, and cost containment. J Econ Lit 29(2):523–552Google Scholar
  73. Werblow A, Felder S, Zweifel P (2007) Population ageing and health care expenditure: a school of ‘red herrings’? Health Econ 16(10):1109–1126CrossRefGoogle Scholar
  74. Westerhout WMT (2006) Does ageing call for a reform of the health care sector? CESifo Econ Stud 52(1):1–31CrossRefGoogle Scholar
  75. Wildavsky A (1977) Doing better and feeling worse: the political pathology of health policy. Daedalus 106(1):105–124Google Scholar
  76. Wong A, Van Baal PHM, Boshuizen HC, Polder JJ (2011a) Exploring the influence of proximity to death on disease specific hospital expenditures: a carpaccio of red herrings. Health Econ 20(4):379–400CrossRefGoogle Scholar
  77. Wong A, Boshuizen HC, Schellevis FG, Kommer GJ, Polder JJ (2011b) Longitudinal administrative data can be used to examine multimorbidity, provided false discoveries are controlled for. J Clin Epidemiol 64(10):1109–1117CrossRefGoogle Scholar
  78. Wong A, Wouterse B, Slobbe LCJ, Boshuizen HC (2012) Medical innovation and age-specific trends in health care utilization: findings and implications. Soc Sci Med 74(2):263–272CrossRefGoogle Scholar
  79. Woodward RS, Wang L (2012) The oh-so straight and narrow path: can the health expenditure curve be bent? Health Econ 21(8):1023–1029CrossRefGoogle Scholar
  80. Wouterse B, Meijboom BR, Polder JJ (2011) The relationship between baseline health and longitudinal costs of hospital use. Health Econ 20(8):9-685-1008CrossRefGoogle Scholar
  81. Yang Z, Norton EC, Stearns SC (2003) Longevity and health care expenditures: the real reasons older people spend more. J Gerontol Ser B 58(1):2–10CrossRefGoogle Scholar
  82. Zweifel P, Felder S, Meiers M (1999) Ageing of population and health care expenditure: a red herring? Health Econ 8(6):485–496CrossRefGoogle Scholar
  83. Zweifel P, Steinmann L, Eugster P (2005) The Sisyphus syndrome in health revisited. Int J Health Care Financ Econ 5:127–145CrossRefGoogle Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  • Claudine de Meijer
    • 1
    • 2
    Email author
  • Bram Wouterse
    • 3
    • 4
  • Johan Polder
    • 3
    • 4
  • Marc Koopmanschap
    • 1
    • 2
  1. 1.Institute of Health Policy and Management, Erasmus University RotterdamRotterdamThe Netherlands
  2. 2.Institute for Medical Technology AssessmentRotterdamThe Netherlands
  3. 3.National Institute for Public Health and the EnvironmentBilthovenThe Netherlands
  4. 4.Tranzo, Tilburg UniversityTilburgThe Netherlands

Personalised recommendations