are dragons): Prospects of runaway health care cost in the graying emerging economies of Asia Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms. Economic and Demographic Information, 2012 Peoples Republic of China Indonesia
Viet Nam Population (million) 1,351 247 89 Population , >65 (%) 8.7 5.1 6.6 Old-age Dependency Ratio (% of working-age population) 11.8
7.8
9.3
GDP per capita (constant 2005 US$) 3,348
1,732
986
Health expenditure per capita, PPP (constant 2005 international $, 2012) 480
150 233
Background Source: UN, Department of Economic and Social Affairs. World Population Prospects: The 2012 Revision http://esa.un.org/wpp/Excel-Data/population.htm (accessed 4 April 2014) and World Bank, World Development Indicators online database http://data.worldbank.org/data-catalog/world-development-indicators (Accessed 30 May 2014).
Age Group Viet Nam 2010 2030 2050 Total population by five-year age group (million) Source: UN, Department of Economic and Social Affairs. World Population Prospects: The 2012 Revision http://esa.un.org/wpp/Excel-Data/population.htm (accessed 4 April 2014)
Demographic Shifts 0 50 100 150 200 250 300 350 PRC Indonesia Viet Nam I n
M i l l i o n s
2010 2030 2050 Total population, 65 years and over (million, percent) Source: UN, Department of Economic and Social Affairs. World Population Prospects: The 2012 Revision http://esa.un.org/wpp/Excel-Data/population.htm (accessed 4 April 2014) 0 5 10 15 20 25 30 PRC Indonesia Viet Nam I n
P e r c e n t
2010 2030 2050 PRC Indonesia Viet Nam USA 0 5 10 15 20 25 30 35 40 2010 2015 2020 2025 2030 2035 2040 P e r c e n t
Demographic Shifts Source: UN, Department of Economic and Social Affairs. World Population Prospects: The 2012 Revision http://esa.un.org/wpp/Excel-Data/population.htm (accessed 1 July 2014). Old-age dependency ratio (ratio of population aged 65+ per 100 population 15-64) Speed of Population Aging Share in total population (percent) The shares of elderly population rose more steeply in PRC and Indonesia than in Viet Nam where rapid increase happened instead in the 15-64 age group in 1995-2012. The share of elderly population in Viet Nam will begin to climb and at rate faster than in two other countries only in years after 2015. 0 5 10 15 20 25 30 35 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 5 2 0 2 5 2 0 3 5 2 0 4 5 2 0 5 5 2 0 6 5 2 0 7 5 2 0 8 5 2 0 9 5 Model Forecast P e r c e n t
65 years and over Viet Nam PRC Indonesia 0 10 20 30 40 50 60 70 80 1 9 9 5 1 9 9 7 1 9 9 9 2 0 0 1 2 0 0 3 2 0 0 5 2 0 0 7 2 0 0 9 2 0 1 1 2 0 1 5 2 0 2 5 2 0 3 5 2 0 4 5 2 0 5 5 2 0 6 5 2 0 7 5 2 0 8 5 2 0 9 5 Model Forecast P e r c e n t
15-64 years Viet Nam PRC Indonesia Source: UN, Department of Economic and Social Affairs. World Population Prospects: The 2012 Revision http://esa.un.org/wpp/Excel-Data/population.htm (accessed 4 April 2014) Speed of Population Aging 7 8 9 10 11 12 13 14 1860 1880 1900 1920 1940 1960 1980 2000 2020 2040 P e r c e n t
o f
p o p u l a t i o n
a g e d
6 5 +
Time required or expected for percentage of population aged 65 and over to rise from 7 to 14 percent The proportion of elderly people is rising faster in developing countries than in the developed world. Source: Adapted from Kinsella K. He W. An Aging World: 2008. Washington DC: National Institute on Aging and U.S. Census Bureau, 2009. Determinants of Health Care Cost Income Morbidity levels Technology Other factors (including health system coverage and efficiency) Health Care Costs Health expenditure per capita, PPP (constant 2005 international $) health care expenditures has risen significantly in recent years Source: World Bank, World Development Indicators online database http://data.worldbank.org/data-catalog/world- development-indicators (Accessed 30 May 2014) PRC Indonesia Viet Nam 0 100 200 300 400 500 600 1995 1997 1999 2001 2003 2005 2007 2009 2011 2 0 0 5
i n t e r n a t i o n a l
$
Effects of Aging and Population Growth on Health Expenditure MODEL Health expenditure per capita= f (GDP per capita, % of population 65 and over) Country Intercept GDP per capita % of popn 65 and over R2 N PRC -6.5717 0.6718 3.3591 0.9945 18 t-stat -17.2381 3.1092 3.5160 Indonesia -12.8105 1.7461 2.9778 0.9580 18 t-stat -12.9965 9.0666 5.8503 Viet Nam -6.3863 2.1172 -1.4211 0.9861 18 t-stat -6.2581 21.8896 -1.8121 Notes: N refers to number of time series observations from 1995 to 2012 when data for health expenditure per capita is available. Regression coefficients and t-values in gray are insignificant.
Health expenditure per capita tends to increase with GDP per capita and population aging in PRC and Indonesia
Health spending in Viet Nam, however, is influenced only by income. The share of elderly population in Viet Nam is relatively stable during the period when regression was done. In contrast, those for PRC and Indonesia have been rising more steeply.
Population aging measured by % of population aged 65 and over has higher impact on health spending than GDP per capita. Original estimates Effects of Aging and Population Growth on Health Expenditure MODEL Health expenditure per capita= f (GDP per capita, % of population 65 and over) Country Intercept GDP per capita % of popn 65 and over R2 N PRC -6.5717 0.6718 3.3591 0.9945 18 t-stat -17.2381 3.1092 3.5160 Indonesia -12.8105 1.7461 2.9778 0.9580 18 t-stat -12.9965 9.0666 5.8503 Viet Nam -8.1110 1.9754 0.9841 18 t-stat -20.6084 32.4840 Notes: N refers to number of time series observations from 1995 to 2012 when data for health expenditure per capita is available.
Health expenditure per capita tends to increase with GDP per capita and population aging in PRC and Indonesia
Health spending in Viet Nam, however, is influenced only by income. The share of elderly population in Viet Nam is relatively stable during the period when regression was done. In contrast, those for PRC and Indonesia have been rising more steeply.
Population aging measured by % of population aged 65 and over has higher impact on health spending than GDP per capita. Preferred solution: Viet Nam model excludes elderly population. Health care cost in 2030 Viet Nam estimates excludes elderly population. PRC, 6780 Indonesia, 5828 Viet Nam, 3071 0 1000 2000 3000 4000 5000 6000 7000 8000 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 2 0 2 1 2 0 2 2 2 0 2 3 2 0 2 4 2 0 2 5 2 0 2 6 2 0 2 7 2 0 2 8 2 0 2 9 2 0 3 0 H e a l t h
e x p e n d i t u r e
p e r
c a p i t a ,
P P P
( 2 0 0 5
i n t e r n a t i o n a l
$ )
Health expenditure, total (% of GDP) 0 20 40 60 80 100 120 140 2005 2006 2007 2008 2009 2010 2011 2012 2030 P e r c e n t
PRC Indonesia Viet Nam We do not knowHere are dragons Probably the real impact will not be as severe, since both demand and supply curve might shift Demand: morbidity compression might attenuate demand Supply: Health systems improvement might bring in efficiency
Will these Malthusian predictions come true? No research to support this hypothesis in these countries: we are in uncharted territories However, two factors might need to be considered Increase in elderly population outweighs any potential morbidity compression Morbidity compression might not happen in emerging economies, since todays elderly population experienced poor nutrition in their childhood environmental insult during adulthood Will Morbidity Compression Attenuate the Increase in Health Costs? The three Asian Countries are likely to see large increase in their health care costs, which can become unaffordable Population aging will be one key factor in this increase Much more research is needed to understand the likely impact of aging process on health care costs New models of health care costs need to be developed Need to start working on this issue NOW