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Working paper

The ageing population and future health costs: 1996 - 2051

Department of Health and Aged Care occasional papers: new series no. 7

15 Aug 1999

The ageing population in Australia, as in other countries, will affect the country's economic and social systems. The likely of such effects are the subject of considerable conjecture, commentary, research and analysis. In the health sector, contributions to the debate are found in the literature and in the proceedings of national workshops, one of the most recent being held in March 1999. Researchers have adopted a variety of approaches to project part or all of future health and aged care costs.

This paper focuses on projecting acute care hospital costs for public and private patients, and government expenditure on benefits paid for Medical Benefits Schedule (MBS) items and Pharmaceutical Benefits Schedule (PBS) items. Although accounting for a considerable proportion of total health outlays, these components of costs do not cover all such costs: for example they do not include out-of-pocket payments to cover the ‘gaps’ between what doctors charge and what government subsides cover for medical procedures. Although no consensus on the magnitude of the effect of the ageing population on health costs has emerged, there is growing evidence to suggest that the problem is not as large as some commentators have suggested.

This paper leans towards the optimistic end of the spread of opinion in that it argues that, although the progressive ageing of the Australian population will present significant challenges for policy makers, the problem should be manageable to the extent that today’s cost are good guide to those that will apply over the long term (in real terms), and that the Australian economy continues to grow (on average) over the long run at rates that is has over the last ten-to-fifteen years. Australia’s Medical Benefits Schedule (MBS), Pharmaceutical Benefits Scheme (PBS) and Hospital Morbidity Data (HMD) administrative data collections provide cost information on health care consumption by residents. Using 1996 data for Western Australia, this study projects health care expenditures (excluding co-payments) for the Australian population out to the year 2051 based on projections of the Australian population generated using similar methodology to that developed by the Australian Bureau of Statistics (ABS) to produce its population projections. 

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