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AGEING POPULATION AND THE FUTURE
OF HEALTH CARE PLANSAn international perspective
J. François OutrevilleUNCTADVisiting Professor SUFEAdjunct Professor HEC Montréal
AGEING POPULATION AND THE FUTURE OF HEALTH CARE PLANS
• Background information on health care systems
• The increasing role of private health plans• Challenges to come• Ageing revisited
Health care expenditure as % of GDPSource: OCDE Health Data 2005
A comparison between 1980 and 2003
0
2
4
6
8
10
12
14
16
USA
Swiz
erla
nd
Ger
man
y
Gre
ece
Fran
ce
Nor
way
Bel
gium
Can
ada
Port
ugal
Swed
en
Aus
tral
ia
Net
herl
ands
Den
mar
k
Ital
y
Japa
n
Hun
gary
Aus
tria
Kor
ea UK
Spai
n
Tur
key
Cze
ch
Finl
and
Pola
nd
Mex
ico
The Growth of HCE today:examples
• Rapid Growth USA, Greece, Portugal, Korea, Turkey
• Stabilized Netherlands, UK, AustriaGermany, Canada
• No growth Sweden, Finland, Denmark
A linear relationship?
Health care expenditure:the size of public sectors
Source: OCDE Health Data 2006
Out of Pocket expenditure and Private Health insurance: No relationship
Source: OCDE Health Data 2004
Health Insurance systems: principles
• Bismarck’s principle
• Beveridge’s principle
• State budget
• Private insurers under state control
Health Insurance systems: Examples
Compulsory Free choice
Privateor
competitive
Netherlands
Switzerland
USA
« Opt-out » (Germany)
Publicor
monopolistic
Almost all european countries(Bismarck or Beveridge)
UN system and International Organizations
Increasing role of Private Insurance HCE as % GDPSource: OCDE Health Data 2004
0
2
4
6
8
10
12
14
16
Pays
Bas
Fran
ce
All
emag
ne
Can
ada
Suis
se
Irla
nde
Aus
tral
ie
Aut
rich
e
Esp
agne UK
Mex
ique
Finl
ande
Dan
emar
k
Port
ugal
Ital
ie
Japo
n
Hon
grie
Population covered by Private Insurance Source: OCDE Health Data 2004
0
10
20
30
40
50
60
70
80
90
100
Aus
tral
ie
Pays
Bas
Fran
ce
USA
Can
ada
Irla
nde
Suis
se
Aut
rich
e
Dan
emar
k
All
emag
ne
Ital
ie
Port
ugal
Esp
agne UK
Finl
ande
Classification of Private Health Insurance Plans
• Primary coverage• Risks not covered by the public scheme
(supplementary insurance)• Complementary insurance• Access to private market (substitutable)
Private Health Insurance Examples
Substitutable Complementary Supplementary
Optional UK
Germany
Italy
Australia
France
Belgium
Switzerland
Canada
Netherlands
Compulsory Spain
Netherlands
The challenges• Health insurance schemes are being dragged into increasing
expenditure by demographic changes and improvements in medical treatment.
• A growing interest in the problem of the long-term survival of
public schemes is paralleled by a desire to arrive at an acceptable compromise between equity and efficiency, between meeting individual needs and controlling collective expenditure.
• The European social philosophy of each contributing according to his means is radically opposed to the individualistic North American arrangement whereby everyone takes out insurance according to his needs.
The problems
• Budget deficits
• Tax limits
• Cost of new medical treatments
• Ageing of the population
• Decreasing labor force
Several options are available• « Opt out » (Germany)
– Voluntary or compulsory
• Public scheme covers only catastrophic risks– Case of LTC (Netherlands and Germany)
• Higher and competitive premiums but subsidies for lower income– Case in Switzerland
• Covers only basic health treatments (Doctors & Hospitals)– Some treatments excluded (drugs in Canada)
• Open markets to free choice and free trade– Cultural barriers– Portability of insurance coverage
Satisfaction rate for public schemes is highSource: OCDE Health Data 2004
0
10
20
30
40
50
60
70
80
90
Aus
tria
Fran
ce
Bel
gium
Den
mar
k
Finl
and
Net
herl
ands
Swed
en UK
Ger
man
y
Spai
n
Can
ada
USA Ital
y
Port
ugal
Gre
ece
AGEING POPULATION AND THE FUTURE OF HEALTH CARE PLANS
• “The first and primary cause of this crisis is once again the ageing of the population…” (Longman, 1987)
Ageing of the population
When Bismarck devised the social security contract for Germany, the official pension age was 65 and life expectancy 45.
Keeping the same ratio, retirement age today should be at 98.
Old age estimated to be at 75 years in 1985, will be 82 years by 2040: an annual gain of 1.5 months
Ageing of population and health care expenditure
Ageing of population and health care expenditure
Source : S. Jacobzone (2003)Source : S. Jacobzone (2003)
Ageing and HCE: What is the relationship?
Hypotheses:• The probability of initiating a treatment episode is
independent of age.• Medical expenditure per treatment episode increases
with age.• Medical expenditure increases sharply with closeness to
death regardless of age.• Medical expenditure before death increases/decreases
with age?
References:
• Lubitz and Riley, New England J. of Medicine, 1993
• Zweifel, Felder and Meier, Health Economics, 1999
• Felder and Schmitt, J. Health Economics, 2000
• Hogan, Lunney, Gabel and Lynn, Health Affairs, 2001
• Levinsky et al., J. of American Medical Association, 2001
• Outreville, Geneva Papers on Risk and Insurance, 2001
• Seshamani and Gray, Applied Health Economics and Health Policy, 2003
• Seshamani and Gray, J. of Health Economics, 2004
• Outreville, Applied Health Economics and Health Policy, 2005
Empirical evidence
• UN health insurance plan• 15,000 insured persons• 2 periods 1996-1997 and 2000-2002
HEALTH CARE EXPENDITURE (HCE)
0
2,000
4,000
6,000
8,000
10,000
12,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99
Nb InsuredHCE 2000-02
HCE in the two samples
0
2,000
4,000
6,000
8,000
10,000
12,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99
HCE 1996-97HCE 2000-02
Hospital HCE in the 12 months preceding death
By class of age in CHF
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99
Average cost
cost before death
HCE last four quarters of life
0
10
20
30
40
50
60
70
HC
E (
%)
4 3 2 1
Quarters to death
Swiss sampleUS Medicare
HCE before deathFrom one month to one year
0
10
20
30
40
50
60
70
80
90
100
0-29 30-39 40-49 50-59 60-69 70-79 80-89 90-99
1 month3 months6 months12 months
HCE for survivors
0
2,000
4,000
6,000
8,000
10,000
12,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99
HCE totalHCE Survivors
Ageing and HCE: What is increasing with age?
• Trends in medical expenditure are influenced by trends in disability and product innovation.
• Product innovation focus on increasing quality of life at higher ages.
• LTC expenditure before death increases with age
Alzheimer’s diseasePercentage of cases by age group
0
10
20
30
40
50
60
70
80
90
100
30-39 40-49 50-59 60-69 70-79 80-89 90-99
Rate
Cost of pharmaceuticals by age
0
200
400
600
800
1,000
1,200
1,400
30-39 40-49 50-59 60-69 70-79 80-89 90-99
On average from 13% to 16% of total HCE within 10 years
Nursing and Long-Term Care (LTC)
0
500
1,000
1,500
2,000
2,500
3,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99
Average ExpenditureNb of Cases
Average number of days in an hospital has been reduced from 10 to 7 days within 10 years
AGEING AND THE FUTURE OF HEALTH CARE PLANS
• SUSTAINABILITY
– Individuals are living longer in good health.– People over 95 are on average in better state of health than
those over 85 (absence of chronic diseases).
Mortality and disability scenariosT= Total expected life
H= Healthy expected life
Source: E. Pitacco (2002)Source: E. Pitacco (2002)
The demand for LTC
Hypotheses Stable population Ageing population
Compression Demand decrease Demand stable
Equilibrium Demand stable Demand increase
Pandemic Demand increase Demand increase
Negative factors
• Medical expenditure per treatment episode increases with age.
• Trends in medical expenditure are influenced by trends in disability and product innovation.
• Product innovation focus on increasing quality of life at higher ages.
• The traditional family structure continue to change
Improving trends
• Declines in disability rates (-1% per year) even at older age (85+).
• Instrumental activities of daily living (IADLs) are easier to perform today than 20 years ago.
• Product innovation may change the trends
End of life HCE
0
10,000
20,000
30,000
40,000
50,000
60,000
30-39 40-49 50-59 60-69 70-79 80-89 90-99 100-109
HCE 2000-02
HCE 1996-97
?
Nursing and Long-Term Care
30-39 40-49 50-59 60-69 70-79 80-89 90-99 100-109
LTC 2002LTC ?
AGEING AND THE FUTURE OF HEALTH CARE PLANS
• SUSTAINABILITY– Individuals are living longer in good health
• EQUITY– Health Care or Good Health– Health Care or Long Term Care– Health Care or Terminal Care
• INNOVATION– Health Insurance or Life Insurance (terminal illness)– Traditional Insurance or Alternative Risk Transfer
AGEING POPULATION AND THE FUTURE OF HEALTH CARE PLANS
• “As people are living longer, the hope is that they will also live healthily.”