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Projecting EU public expenditure on LTC over the next 50 years

2018 Conference Presentation

Demand measurement and projection EU

12 September 2018

Projecting EU public expenditure on LTC over the next 50 years

Santiago Álvaro Calvo Ramos, European Commission, Belgium

Boriana Goranova, DG ECFIN
Benedetta Martinelli, DG ECFIN


Background: All EU Member States face strong fiscal pressures on their long-term care systems, driven by already high levels of public expenditure and debt in most countries. In the long-term, additional factors are expected to exacerbate these pressures. As such, public expenditure on Long-Term Care (LTC) is highly relevant to the long-term sustainability of public finances.
Public expenditure on LTC is dependent on several factors that affect the demand and supply of these services, such as the dependency status of the population, the model of LTC provision and availability of human resources. The rate of economic growth also plays a role, as does the development and use of new technologies.

Objectives: The 2018 Ageing Report's macro-simulation model captures the effect of demographic and non-demographic variables on future public expenditure on long-term care. The model includes many of the described drivers of care.
The interplay between LTC and health care as well as the fragmented governance of most LTC systems result in a general lack of comprehensive data on expenditure and number of recipients in each type of care setting. Publicly available data plus national data provided by EU Member States is combined to provide a complete a picture as possible.

The methodology proposes sensitivity analysis for key assumptions based on a series of scenarios estimating changes in:
• the future relative numbers of elderly people, reflecting changes in the population projections;
• the future numbers of dependent elderly people, by applying changes to the prevalence rates of dependency;
• the balance between formal and informal care provision;
• the balance between home care and institutional care within the formal care system; and
• the unit costs of care.

The macro-simulation model splits the whole population into groups which are assigned certain characteristics (e.g. age, gender, per capita expenditure, health status, type of care/support…). Changes in the (relative) size or features of these groups lead to expenditure changes over time.

The baseline projections reflect a policy-neutral situation, where future not-yet legislated policy changes are not considered and changes in expenditure are mainly driven by changes in the composition of the population. However, pressure for increased public provision and financing of LTC services may grow substantially in coming decades, especially in Member States where the bulk of long-term care is currently provided informally. Therefore, additional "policy scenarios" have been prepared to illustrate the impact of possible future policy changes such as Member States deciding to provide more formal LTC services.With respect to earlier projections (2015 Ageing Report), newly available data sources have allowed a more precise construction of the base data and a refined projection methodology has been used for the new projections.

The presentation addresses i) the methodology for constructing the base data, ii) the methodology for performing the projections and iii) the results of the projections (to be published in May and which will be available by the Conference's date).
Key topics: projections of long-term care (service) demand and supply, international comparisons of long-term care systems, the organisation, delivery and regulation of long-term care services