The effects of population ageing on health care expenditure: A Bayesian VAR analysis using data from Italy

- A B-VAR model is proposed to assess whether health expenditure is driven by ageing.
- The results shows that health expenditure in Italy is more affected by the longevity.
- The analysis underlines the need of more efficient plans to better support elderly.

Currently, the dynamics of the population have raised concerns about the future sustainability of Italy's national health system. The increasing proportion of people over the age of 65 could lead to a higher incidence of chronic-degenerative diseases and a greater demand for health and social care with a consequent impact on health spending. Although in recent years the quantity and quality of works on the relationship between ageing and health expenditure has increased substantially these works do not always obtain similar results.Starting from this point, we use a B-VAR model and Eurostat data to investigate over the period 1990-2013 the impact of demographic changes on health expenditure in Italy. We estimate these models using impulse-response analysis and variance decomposition. The results show that health expenditure in Italy reacts more to the ageing population compared with life expectancy and per capita GDP. In response to these findings, we conclude that the impact of the increase in the elderly population with disabilities will fall on the long-term care sector. Effective health interventions, such as health-promotion and disease-prevention programs that target the main causes of morbidity, could help to minimize the cost pressures associated with ageing by ensuring that the population stays healthy in old age. We consider the implications of this work for health care policy suggestions and for future research.