Monday, February 11, 2013

Cost of demographic change

The Scottish Parliament Finance Committee has published a report that looks at the aging population in Scotland and the financial consequences. The inquiry remit was:

To identify the impacts which demographic change and an ageing population will have primarily on the public finances in respect of the provision of health and social care, housing, and pensions and the labour force, and the planning being undertaken by the Scottish Government and key public bodies to mitigate such impacts.”

Scotland’s population increased to 5,295,000 in 2011 – the highest ever. Since the 2001 Census, the population has increased by 233,000 (5%). This represents the fastest growth rate between two census years in the last century. However, it is the most elderly age-groups of the population that are projected to increase most dramatically. Between 2010 and 2035 those aged 75 and over are projected to increase by 82%. The committee looked at the financial implications of this in three main areas: health and social care; housing; pensions and the labour force.

Evidence to the committee highlighted the importance of focusing on healthy life expectancy as well as life expectancy.  The ratio of healthy life expectancy to non-healthy life expectancy is not changing much in Scotland (for men it is widening), so the increase in life expectancy is also increasing the potential costs. ADSW estimates the difference between best and worst case scenarios is over £1 billion by 2030 - the difference between an 18.4% increase in costs (excluding inflation) or a 28.7% increase between 2010 and 2030. The committee recommends that the Scottish Government, councils and health boards do more long term planning to address this issue.

Council and health board budgets have not kept up with demographic change in the past ten years, let alone the future. For example, emergency admissions to hospitals have a targeted 10% reduction, but they are actually increasing, particularly for the o/75s. The committee found limited progress in preventative spending, joint planning or a shift in funding.

Current demographic projections would increase primary care spending for those aged 65 and older by 70 per cent by 2033 unless action is taken. The cost of a primary care consultation would need to be reduced by more than 38 per cent for spending on primary care for those above the age of 65 to remain constant in real terms by 2033.

The report also highlights significant pressure on resources arising from a likely increase in a number of health conditions as a consequence of an ageing society. These include: cognitive ability; hearing and sight loss; osteoporosis/fragility fractures.

Evidence on housing highlighted the need for new build and adaption of existing stock to accommodate an aging population. For example, the overall number of pensioner households requiring adaptations will rise from 66,300 in 2008 to over 106,000 in 2033. It is unclear if this rising demand has been costed in current plans.
Overall this report is a useful reminder of the financial implications of an aging population. If more than a little light on the positive elements.