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2012 Conference Presentation

EconomicsFunding/purchasing EU

8 September 2012

Public expenditure on long-term care in EU-27: scenarios and projections up to 2060.

Barbara Lipszyc, DG Economic and Financial Affairs, European Commission, Belgium
Etienne Sail, DG Economic and Financial Affairs, European Commission, Belgium
Ana Xavier, DG Economic and Financial Affairs, European Commission, Belgium


Objective: Safeguarding the sustainability of public finances is a key policy objective in the EU. The aim of this paper is to provide long-term projections of public long-term care expenditure for all EU27 Member States and Norway; projections that are helpful in highlighting the immediate and future policy challenges for governments posed by rising long-term care costs.

Data and Methods: The projections are based on international data sources and include a unique set of data, namely country-specific age-cost profiles for public long-term care. These allow tracking the effects of demographic ageing on public long-term care spending over time. Different scenarios test the impact of ageing, changes in disability status, policy changes affecting the balance between formal and informal care, and unit cost changes on the projection results. The basic setup of the model is a simulation model whereby the overall population is disaggregated into a number of groups having a common set of features, such as age, gender, disability status. As the number of individuals in each group changes over time and according to the related scenario, so do the aggregate values of the endogenous variables.

Results: The analysis of the scenarios and results allow to draw the following conclusions. First, considering the "policy-neutral" scenarios, the demographic and size effect is further proved as the key determinant, contrary to what is now shown in the area of acute health care. Indeed, the concerned population measured on the basis of the demographic and disability assumptions, in particular the older disabled, makes the bulk of the change in projected public expenditure on long-term care. Further, a projected improved health status has a quite strong effect on reducing the projected expenditure increase. Second, policy scenarios show that, given the current structural characteristics of the different EU long-term care systems, a projected increase in the formal coverage of the population is potentially more costly than an increase in the unit cost of formal care.

Policy implications: By 2060, continuous change in the structure of the population is expected to have an impact on longterm care public expenditure, through the evolution of both the absolute and relative size of the older population and its disability status. It directly affects the need, and thereby the demand for long-term care. The unit cost of providing care can be very high, especially when provided in an institution. In addition, the governments will have to face expected pressure on the long-term care availability and access in all forms, especially in Member States where the bulk of care is currently provided informally. Unless counting on an optimistically strong improvement of the population's health status – in particular, in the older age groups – EU governments will have to face the inevitable expected costs and to react through adequate and sustainable political choices that may differ from those envisaged today.


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