Projecting healthcare expenditure in Spain under different scenariosmethodology and results

Resumen

Following the methodology used by the EU Ageing Working Group, in this paper we estimate the foreseen evolution of Spanish healthcare expenditure until 2060 under different scenarios, which assume changes in demographic and health status variables, as well as in income elasticity of the demand for health care services. The effect of proximity to death is also considered in the estimations. Demographic variations account for expected changes in the volume and structure of Spanish population. Regarding the evolution of health status, two alternative hypothesis are assumed about health improvements: i) the so-called ‘dynamic equilibrium hypothesis’ assumes that healthy life expectancy grows at the same rate as total life expectancy; ii) the ‘compression of morbidity hypothesis’ assumes that healthy life expectancy grows at a higher rate than total life expectancy, hence implying that the number of years spent with diseases or disabilities decreases over time. We also consider two classical scenarios about the evolution of the average healthcare expenditure: i) in the first scenario average healthcare expenditure per capita remains unchanged as a share of GDP per capita; ii) in the second one, it remains unchanged as a share of GDP per worker. We add a third scenario which takes into account the forecasted evolution of Spanish economy, by assuming that health expenditure has an income elasticity evolving from 1.1 in 2011 to 1 in 2060, being 1 for the period 2008 to 2011. We suggest that the highest healthcare costs associated with those who die should be incorporated into the projection models. Therefore, we estimate the cost of survivors and decedents by age and sex from available data. The results show that health expenditure will grow in real terms to reach, in 2060, between 6.4% and 8.8% of GDP, depending on the scenario used to calculate projections. It implies that public health expenditure will grow at an average annual rate ranging from 1.78% to 2.40%. The expected evolution of the volume and structure of Spanish population (all the remaining factors constant) will place the percentage of public expenditure on health over the GDP at 7.88% in 2060. The growth of health expenditure is reduced, as expected, when the effect of proximity to death is included. This effect diminishes as health status improves. The impact of different health status evolution assumptions on the projected share of public healthcare expenditure over GDP is quite significant. The difference between the compression of morbidity scenario and the expansion of morbidity hypothesis ranges from 1.35 to 1.57 points of GDP in 2060, depending on the final scenario used. If elasticity is assumed to vary over time, the estimations obtained increase with respect to those linked to a constant elasticity. Differences range from 0.32 to 0.39 points of GDP, depending on the health status hypothesis considered.