Who's Going Broke? Comparing Growth in Healthcare Costs in Ten OECD Countries

Government healthcare expenditures have been growing much more rapidly than GDP in OECD countries. For example, between 1970 and 2002 these expenditures grew 2.3 times faster than GDP in the U.S., 2.0 times faster than GDP in Germany, and 1.4 times faster than GDP in Japan. How much of government healthcare expenditure growth is due to demographic change and how much is due to increases in benefit levels; i.e., in healthcare expenditures per beneficiary at a given age? This paper answers this question for ten OECD countries -- Australia, Austria, Canada, Germany, Japan, Norway, Spain, Sweden, the UK, and the U.S. Specifically, the paper decomposes the 1970-2002 growth in each countrys healthcare expenditures into growth in benefit levels and changes in demographics. Growth in real benefit levels has been remarkably high and explains the lions share %uF818 89 percent %uF818 of overall healthcare spending growth in the ten countries. Norway, Spain, and the U.S. recorded the highest annual benefit growth rates. Norways rate averaged 5.04 percent per year. Spain and the U.S. were close behind with rates of 4.63 percent and 4.61 percent, respectively. Allowing benefit levels to continue to grow at historic rates is fraught with danger given the impending retirement of the baby boom generation. In Japan, for example, maintaining its 1970-2002 benefit growth rate of 3.57 percent for the next 40 years and letting benefits grow thereafter only with labor productivity entails present value healthcare expenditures close to 12 percent of the present value of GDP. By comparison, Japans government is now spending only 6.7 percent of Japans current output on healthcare. In the U.S., government healthcare spending now totals 6.6 percent of GDP. But if the U.S. lets benefits grow for the next four decades at past rates, it will end up spending almost 18 percent of its future GDP on healthcare. The difference between the Japanese 12 percent and U.S. 18 percent figures is remarkable given that Japan is already much older than the U.S. and will age more rapidly in the coming decades. Although healthcare spending is growing at unsustainable rates in most, if not all, OECD countries, the U.S. appears least able to control its benefit growth due to the nature of its fee-for-service healthcare payment system. Consequently, the U.S. may well be in the worst long-term fiscal shape of any OECD country even though it is now and will remain very young compared to the majority of its fellow OECD members.

Measuring fiscal sustainability on the municipal level: A German case study

The consequences of ageing populations for federal and state fiscal policies are, due to the research efforts of the last two decades, well known. However, it is rather less well known how the municipal level is affected. Therefore, by using a modification of the sustainability definition formulated by Blanchard, Chouraqui, Hagemann, and Sartor (1990) and the concepts of Auerbachs, Kotlikoffs and Gokhales Generational Accounting (1991) we define a new framework focusing on capital stock, financial management and depreciation of municipal assets. This papers purpose is to deliver a concept which is able to provide sound indicators for long-term budgeting by local authorities. We apply this framework to three German cities with different typologies, Munich, Freiburg and Schwäbisch Hall. --Fiscal sustainability,demographic transition,municipalities

Friedens- versus Ausscheidegrenze in der Krankenversicherung: Ein kriegerischer Beitrag für mehr Nachhaltigkeit

Die private (PKV) und die gesetzliche Krankenversicherung (GKV) werden durch die so genannte Friedensgrenze getrennt. Um die daraus resultierende Risikoselektion zu vermindern, wird die Einführung einer sogenannten Ausscheidegrenze nach niederländischem Vorbild mit Hilfe der Generationenbilanzierung untersucht. Aufgrund der Einkommensumverteilung innerhalb der GKV führt eine solche Reform nicht zu mehr Nachhaltigkeit. Jedoch kann eine Ausscheidegrenze eine positive Dynamik entfalten, wenn entweder ein System von Gesundheitsprämien in der GKV vorherrscht oder aber die PKV für die neuen Kunden eine „Ablöseprämie“ zahlt, die genau den Umfang der Einkommensverteilung dieser Gruppe ausmacht.The German health insurance system is separated between the private and public sector by a social security ceiling. To reduce the risk selection of the current system we discuss the implications of the conversion of the upper income limit into a provision limit. Using a generational accounting approach, we find that such a conversion has a negative effect in respect of sustainability. In addition, we present the idea of a transfer premium, which reflects the value of the analyzed group of insurants. Our results show that with a transfer premium or in a system of lump-sum-premiums, the provision limit would have positive implications and would leave the German system more sustainable

Measuring Fiscal Sustainability on the Municipal Level: A German Case Study

The consequences of ageing populations for federal and state fiscal policies are, due to the research efforts of the last two decades, well known. However, it is rather less well known how the municipal level is affected. Therefore, by using a modification of the sustainability definition formulated by Blanchard, Chouraqui, Hagemann, and Sartor (1990) and the concepts of Auerbachs, Kotlikoffs and Gokhales Generational Accounting (1991) we define a new framework focusing on capital stock, financial management and depreciation of municipal assets. This papers purpose is to deliver a concept which is able to provide sound indicators for long-term budgeting by local authorities. We apply this framework to three German cities with different typologies, Munich, Freiburg and Schwäbisch Hall

Who’s going broke? Comparing growth in Public healthcare expenditure in Ten OECD Countries

Government healthcare expenditures have been growing much more rapidly than GDP in OECD countries. How much of this growth is due to demographic change versus increases in benefit levels (expenditures per person at a given age)? This paper answers this question for ten OECD countries –Australia, Austria, Canada, Germany, Japan, Norway, Spain, Sweden, the UK, and the U.S. using data from 1970-2002. Growth in benefit levels explains 89 of overall healthcare spending growth in the ten countries over the period, with Norway, Spain, and the U.S. recording the highest annual benefit growth rates. As we show, allowing government healthcare benefit levels to grow at historic rates is fraught with danger given the impending retirement of the baby boom generation.Healthcare expenditure growth, long-term fiscal imbalance

Social health insurance: The major driver of unsustainable fiscal policy?

During the next decades the populations of most developed countries will grow older as a result of the low level of birth rates since the 1970s and/or the continuously increasing life expectancy. We show within a Generational Accounting framework how unsustainable the public finances of France, Germany, Switzerland and the U.S. are, given their demographic developments. Thereby, our focus lies on social health insurance systems which are in addition affected by the medical-technical progress. Due to the cost-increasing effect of the medical-technical progress one can justifiably say that social health insurance schemes are the major drivers behind unsustainable fiscal policies. --

Technischer Anhang zu "Konjunktur und Generationenbilanz: Eine Analyse anhand des HP-Filters"

Dieser Anhang stellt die Methodik der Generationenbilanzierung und des Konjunkturbereinigungsverfahrens mittels des HP- Filters vor. Zudem werden die Datengrundlagen wie das staatliche Budget der Jahre 1993 bis 2003 und umfangreiche Sensitivitätsanalysen in Abhängigkeit der gewählten Parameter des HP- Filterverfahrens und der Elastizitäten für jedes Jahr bereit gestellt, um die Aussagen und Berechnungen des Diskussionspapier nachvollziehen zu können

Health Insurance and Demography: The Russian Case

This paper assesses the long-term fiscal position of the Russian health insurance system using Generational Accounting, with particular attention to special factors of the health care sector. We find out that the demographic development of Russia causes a significant burden for future generations. Taking into account a form of cost pressure due to the medical-technical progress or a widen of the scope of benefits in the health care sector, we show that the burden is comparable to OECD-countries like Germany

Ehrbarer Staat? Die Generationenbilanz. Update 2008: Migration und Nachhaltigkeit

Die gute Konjunktur hat die Haushaltssituation von Bund, Ländern und Kommunen sowie der Sozialversicherungen im Jahr 2007 erheblich verbessert. Doch für eine Entwarnung ist es noch zu früh. Ein ehrbarer Staat, der auf das langfristige Wohl seiner Bürger bedacht ist, darf die fiskalische Situation nicht nur anhand der aktuellen Haushaltslage beurteilen, sondern muss vielmehr die langfristigen Konsequenzen seines Handelns berücksichtigen. Vor diesem Hintergrund haben die Stiftung Marktwirtschaft und das Forschungszentrum Generationenverträge der Albert-Ludwigs-Universität Freiburg eine fortlaufende Analyse der langfristigen Tragfähigkeit der aktuellen Wirtschafts- und Sozialpolitik initiiert.Das nun vorliegende zweite Update beinhaltet eine umfangreiche Datenaktualisierung und berücksichtigt die in den letzten Monaten beschlossenen, fiskalisch wirksamen Reformen. Als wesentliche methodische Neuerung erfasst die vorliegende Studie mit dem Schwerpunktthema Zuwanderung die fiskalischen Unterschiede zwischen der ausländischen und der deutschen Bevölkerung. Dies ermöglicht es - ergänzend zur bisherigen Darstellung des Status quo - das Potential der Zuwanderungspolitik im Hinblick auf eine Verbesserung der fiskalischen Tragfähigkeit der öffentlichen Haushalte zu analysieren