The Sustainability of European Health Care Systems: Beyond Income and Ageing

Abstract

During the last thirty years health care expenditure (HCE) has been growing much more rapidly than GDP in all OECD countries. Against this background, we look at the determinants of HCE growth in Europe, explicitly taking into account the role of income, ageing population, life habits, technological progress, as well as institutional and budgetary variables. Our results confirm that the current trend of increasing HCE is rooted in a set of differentiated factors. Income levels lead to higher HCE, and the magnitude of the estimated elasticity poses serious concerns about long-term sustainability of current trends. All in all, HCE growth appears to be driven by structural factors that cannot be easily compressed if not through rationing. The key challenge for many European Governments seems to be the design of pluralistic systems, where a well-balanced mix of public and private financing can realize a balance between sustainability and access.health care expenditure; sustainability; ageing population; income elasticity; welfare