With over 80% of health spending in the EU being publicly financed, the ability to forecast future budgetary pressures, such as the magnitude and growth of health expenditure, is essential for fiscal sustainability. In this context, the ageing EU population is a primary concern, as this demographic shift leads to increased health and long-term care needs, a rise in chronic conditions and comorbidities and a smaller proportion of working-age individuals contributing to the tax base that funds health and long-term care services. Additionally, the high cost of innovative medications, particularly in areas like oncology, further strains healthcare budgets. While investing in more resilient health systems and embracing technological advancements can improve the cost-effectiveness of healthcare services, these pursuits can also lead to additional fiscal pressures.
Tracking long-term budgetary constraints through long-term projections enables decision-makers to plan ahead and accommodate potential financial needs arising from the health and long-term care sector. The Ageing Working Group of the Economic Policy Committee (AWG), using the European Commission services’ models, regularly conducts projections of public expenditure on both health and long-term care (European Commission, 2024[1]). By varying demographic and economic determinants, their 2024 projections produce a number of scenarios assessing their impact on the evolution of public healthcare and long-term care spending over the 2022‑70 period.
The data presented is based on the 2024 baseline scenario (formerly known as “AWG reference scenario”), which models the impact of ageing populations on public budgets. Key assumptions include that: i) half of the projected gains in life expectancy are spent without disability, and ii) the income elasticity of healthcare spending converges linearly from 1.1 in 2022 to 1.0 in 2070. According to this model, the 2024 projections indicate a public spending on healthcare potential average increase of 0.5 percentage points of GDP across the 27 EU countries by 2070 (Figure 8.17). These projections encompass expected increases of 1.6 percentage points in the Slovak Republic, 1.5 percentage points in Ireland and 1.2 percentage points in Spain and Luxembourg. Projected increases are more modest for Germany (0.1 percentage points), Italy (0.1 percentage points), and Bulgaria (0.2 percentage points). Latvia is projected to experience a slight 0.2 percentage point decline in the proportion of GDP absorbed by public healthcare spending during the same period, from 6.0% to 5.8%.
Spending on long-term care is another aspect of public spending that is becoming increasingly crucial with population ageing. Following the same baseline scenario, public long-term care expenditure is projected to increase its share of GDP by an average of 0.9 percentage points across the 27 EU countries by 2070 (Figure 8.18), rising from 1.7% to 2.6%. The projected increase is expected to be highest in Denmark (3.3 percentage points), with comparatively small changes in Italy and Germany (0.5 percentage points). Some countries with relatively low public expenditure on long-term care in absolute terms are projected to experience modest increases in such spending. Nevertheless, these increments represent significant proportional increases relative to their current expenditure levels as a share of GDP. For example, Romania’s public spending on long-term care as a share of GDP is projected to increase by 0.4 percentage points, which represents more than a doubling from its 2022 level of long-term care spending as a share of GDP (0.3% in 2022).
While these projections assume the alignment of budgetary policies with future financial challenges and ensure fiscal sustainability, it can be difficult to mobilise adequate funds to do so in the current economic context – even to maintain historical trends in health spending. Competing priorities on government and household finances are examples of external factors that reduce the ability of countries to inject further economic support into health and long-term care systems. However, investments in health system resilience can eventually lead to savings down the line that offset long-term health expenditure trends (OECD, 2024[2]).
