Ageing and Health Care Costs

otal health care and long-term care for the elderly represent around nine per cent of GDP averaged over some twenty OECD countries and around three-quarters of this is financed through the public sector. The process of ageing in OECD countries will begin to accelerate in virtually all OECD countries starting in about ten years time as the baby-boom generation begins to enter retirement. With forty to fifty per cent of health care spending being currently directed towards the elderly and with per-capita health care costs for those over 65 being three to five times higher than for those under 65, upward pressure on health and long-term care costs is likely to ensue. The extent of this increase in spending will, however, depend on a range of factors in addition to ageing. Technology and its diffusion appear to be important elements. At the same time the progressive declines in fertility rates experienced since the late 1960s will depress the growth of labor supply. The consequent slower growth in GDP will make these additional costs more difficult to finance.