The Impact of Ageing, Socio-economic Differences and the Evolution of Morbidity on Future Health Expenditure – a Dynamic Microsimulation

Background: Population ageing is associated with rising healthcare expenditure. To inform policy and adapt health systems accordingly, a detailed quantitative analysis of the different components of ageing and other factors that influence cost dynamics is needed. – Methods: We use dynamic microsimulation to project healthcare expenditure in Austria and disentangle the effects of changes in longevity, population age-structure, healthy life years and socio-economic health disparities. By combining price weights for healthcare services with information on healthcare consumption from the Austrian Health Interview Survey, we construct average cost profiles by gender, age, and education. These profiles, aligned with the System of Health Accounts, are integrated into the microDEMS model, along with official population projections, to estimate expenditure scenarios until 2060. We examine the relationship between rising life expectancy and changes in healthy life years and assess the potential impact of closing the gap in costs currently observed between education groups. Total and per-capita cost trajectories are derived and evaluated against two indicators for the size of the labour force to assess economic implications. – Results: In all scenarios, demographic ageing increases the financial burden on the economically active population, even with morbidity compression. Nearly two-thirds of the projected cost increase stems from declining mortality, while one-third results from age-structure changes. Per-capita costs rise by 26 percent under a morbidity expansion scenario but could decrease by 5 percent if lower mortality is accompanied by an extension of healthy life years and a reduction in socio-economic health disparities. In economic terms, costs per working-age person increase by 12 to 48 percent, depending on the scenario. When adjusting for labour force expansion and the associated economic benefits, the increase ranges between 5 and 39 percent. – Conclusions: Rising healthcare expenditure poses a major challenge in an ageing society. However, policies that extend healthy life years and reduce socio-economic disparities offer viable strategies to significantly mitigate the economic impact of ageing.