Long-term Care for the Elderly: Financial Requirements and Financing

05.04.2019

WIFO Economist Famira-Mühlberger Spoke at the Geriatric Summit of the Vienna Medical Association

An ageing society, care and support in old age and aging with dignity – these topics were discussed at the "First Austrian Geriatric Summit" of the Vienna Medical Association on 27 March 2019. WIFO economist Ulrike Famira-Mühlberger gave a lecture on the financial requirements and financing of long-term care.

According to Famira-Mühlberger, the coming decades will bring with them a "double ageing" of the population. Both the absolute number of old people in Austria and their share of the population will rise sharply. Statistics Austria forecasts that the number of persons aged 80 and over will rise from around 436,000 in 2017 to just under 1.1 million in 2050. The demographic change will already lead to a marked increase in demand and expenditure for long-term care services by 2030.

The peak of ageing begins in the 2040s. WIFO calculations show an increase in public expenditure on care services from 1.9 billion € in 2016 to 3.5 billion € by 2030 and 8.5 billion € by 2050. This corresponds to a percentage increase of 335 percent between 2016 and 2050 and an average annual real growth rate of 4.4 percent. While the public sector spent 0.6 percent of GDP on care services in 2016, this share will rise to 0.8 percent by 2030 and to 1.4 percent by 2050. Nevertheless, Austria has significantly lower relative expenditure on long-term care in international comparison. Countries such as Switzerland, the Netherlands and the Scandinavian countries spend a considerably higher share of GDP on long-term care.

An ageing society necessarily has a different public expenditure structure than a non-ageing society. Expenditure on areas in which older people are more strongly represented – such as care, pensions or health – will gain in importance in Austria for demographic reasons alone. Long-term care insurance as part of an expansion of social insurance is viewed critically, as this approach would increase ancillary wage costs and the long-term care costs would have to be borne by a smaller insurance community. A private long-term care insurance with tax relief would have negative effects on distribution policy and would be accompanied by major conversion problems, as the baby boom generation would no longer be able to save the required capital. The current financing of care expenditure via the general tax pot is a good solution for Austria, as it has the comparatively smallest negative impact on employment and growth and is borne by a broad insurance community. How the additional costs of an ageing society can be borne is predominantly a question of distribution policy rather than economics.

Please contact

Priv.-Doz. Dr. Ulrike Famira-Mühlberger, PhD

Research groups: Labour Economics, Income and Social Security
© Stefan Seelig
© Stefan Seelig