Reports 2014/14

Long projections of the demand for health services and long-term care in Norway

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Realistic assessments of future public spending on health services and long-term care (HLTC) are key premises in long run projections, which estimate how population ageing over the next decades will contribute to more strained government finances in Norway. HLTC employment is the dominating determinant of HLTC expenditures. Projections of HLTC employment are also important when deciding on the capacity of the education of HLTC personnel. This report presents projections until 2060 of the labour demand from those HLTC sectors producing individual services. Some projections are prolonged until 2100. We emphasize the labour demand from the old-age care sectors (home based care and care given in institutions), because the projections in parts have been prepared for the Ministry of Health and Care as premises for the White paper 29 (2012-2013). We also estimate the long run effects of a given increase in the government HLTC employment on government expenditures and revenues.

Section 2 describes definitions of concepts and data sources that have been used in the projections. Section 3 explains the methodology of the projections. As in several similar projections, the number of man years which meets the demands for a specific HLTC service from the individuals of a given gender and age, is decomposed into i) man years per user of the service, ii) users per individual of given age and gender, and iii) the number of individuals in an exhaustive set of population groups defined by age and gender. Section 4 explains how available data have been exploited to estimate the gender specific age profiles of users and man years per user for the different HLTC services.

Section 5 presents projections of the employment in the HLTC sectors under alternative assumptions regarding demographic variables (fertility, migration and mortality), health status, the quality of the HLTC services as measured by the man years per user, as well as the supply of informal care from family members. Combining plausible assumptions about these variables generates a wide interval for the HLTC employment in the future decades. In a scenario where the present service standards are prolonged, whereas the supply of informal care grows at the same rate as the public old age care, the HLTC share of total employment in 2060 becomes twice as high as the present share of 11 percent.

We find it more realistic that service standards will continue to improve, and that the informal care will not grow significantly from the present level. In a scenario assuming i) percent annual growth in service standards in terms of man hours per user, ii) prolongation of the present level of the total supply of informal care, and iii) constant the age specific health status, as measured by the user frequencies, more than 1/3 of the total number of man years will work in the HLTC-sector in 2060. Given the present degree of part-time work, the share of total employees will grow even stronger. Such changes will have strong impacts on the economy as a whole. We also argue that it is far from obvious that improved health among the elderly will mitigate the future growth in HLTC employment.

Section 6 estimates how a given increase in labour input in Old age care provided by the government affects both government expenditures and revenues by using a macroeconomic equilibrium model. An important effect is that such an increase reduces the bases for indirect taxes and taxes paid by the private business sector. We find that this effect constitutes 25 percent of the total increase in government net expenditures, provided that the total employment does not change. Section 7 makes some concluding remarks.

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