Addressing the Challenge of Global Ageing—Funding Issues

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Addressing the Challenge of Global Ageing—Funding Issues and Insurance Solutions
A good illustration is provided by the evolution through time of the share of the dependent
population (people younger than 15 or older than 65) as a percentage of the total
population (see Figure 1). For any traditional social security system that has largely static
variables (i.e. neither the entry age into the labour force nor the exit age tends to vary
much) this indicator provides a reasonable (although somewhat imperfect) insight into
the amount of people of non-working age compared to the number of those of working
age. A rising share of the dependent population is a concern in many countries facing an
ageing population, since it becomes difficult for pension and social security systems to
provide for a significantly older, non-working population.
Figure 1: Share of the dependent population (people younger than 15 or older than
65) as a percentage of the total population, 2000-2040
45
40
35
30
25
20
15
10
5
0
2000 2005 2010 2020 2030 2040 2050
World
OECD Total
Source: OECD (2011a).
It is likely that the ageing populations will lead to an increase in public spending in the
next decades in many countries. For instance, according to the European Commission,
the increase in public spending is forecast to be between 3 and 7 per cent of GDP in
most EU Member States by 2050. Most of the projected spending increase will be on
pensions, health care and long-term care and to a much lesser extent, on education and
unemployment benefits.
With regards to public health care and LTC spending, the increase in the number of people
living to an older age appears to be a strong driver of the growing health care consumption,
even if experts still propose competing theories on what future health expenditure will
look like for some areas of health utilisation. Yet, it is important to stress that demographic
change has not been the main driver of the increasing level of health care expenditures
in recent decades, but rather demand and supply factors have been more influential. For
instance, according to recent EU projections (European Commission, 2009), the increase
in health and LTC expenditures would lead on average to a level of public expenditures
on health and LTC in 2050 that are around 30 to 40 per cent higher than in 2000.
Most countries offer some level of income security and access to health care to those who
need it, including to the elderly. However as the elderly share of the population rises,