Healthcare expenditure and fiscal sustainability: evidence from Switzerland

Abstract

Growing healthcare expenditure is of major concern for the sustainability of public finances. In order to better explore the fiscal sustainability challenge and to inform the debate, we draw up a new set of healthcare expenditure projections for the particularly interesting case of Switzerland. According to our projections up to 2045, population ageing exerts a growing pressure on public budgets and mandatory healthcare insurance. However, healthcare expenditure is not only driven by demographic change but also by non-demographic drivers such as the increasing national income, medical advances and Baumol’s cost disease. We find that long-term care is more severely affected than healthcare excluding long-term care. This finding implies that population ageing affects public finances to a greater extent than the mandatory healthcare insurance. Our sensitivity analysis suggests that the strongest cost pressure comes from alternative assumptions about the future state of health and Baumol’s cost disease. Accordingly, measures aiming at prevention and efficiency would help most to ease the pressure on public finances and mandatory healthcare insurance.

Keywords

• healthcare expenditure growth; population ageing; long-term projections; sustainability; public finances; social insurance