Mind the gap: population ageing and health financing sustainability

Abstract Background Models used to forecast the effects of population ageing on health financing usually only explore effects on health spending, while neglecting effects on health revenues. Methods Using publicly available data, we construct simulation models to project how changes in the population age mix affect both public sector health revenues and expenditures across a range of countries representing a diverse mix of health financing systems in Europe as well as the Western Pacific (Australia, Bulgaria, Japan, Slovenia, United Kingdom and Vietnam). Results By 2100, the largest gap between health revenues and expenditures due to population ageing under current health financing arrangements is expected in Vietnam; the majority of that health financing gap (87.1%) is attributable to expected growth in health expenditures. In Slovenia and Japan, the financing gaps are forecast to reach less than half that of Vietnam by 2100; however, the reasons for the increases in gaps vary. In Slovenia, nearly half of the increase in the gap (44.2%) is due to reductions in health revenues compared with just under one-third (28.7%) in Japan. Conclusions There is a perception that population ageing will have deleterious effects on the sustainability of public sector health financing. However, this is highly dependent on how financing systems are designed. Our simulation models demonstrate that comparative analyses that give equal attention to both health expenditures and revenues provide decision makers a balanced set of policy options for addressing the challenges of population ageing. The options range from targeting expenditures and utilization of services to diversifying revenue generation.