OF PUBLIC FINANCES. Fabio Pammolli. Roma, 20 Ottobre 2009

Transcription

1 HEALTH CARE AND THE SUSTAINABILITY OF PUBLIC FINANCES Fabio Pammolli Roma, 20 Ottobre 2009

2 TRENDS< ECOFIN PROJECTIONS OECD PROJECTIONS MICRO MACRO IMBALANCES CONCLUDING DISCUSSION

3 Total expenditure (pub + priv) % Gdp FR DE IT ES SE UK USA 1 LONG TERM TRENDS TOTAL EXPENDITURE

4 Public coverage % total expenditure (Usa dx scale) FR DE IT ES SE UK USA LONG TERM TRENDS PUBLIC COVERAGE

5 82 80 Life expectancy at birth FR DE IT ES SE UK USA LIFE EXPECTANCY AT BIRTH (MEN AND WOMEN)

6 Life expectancy at 65 (men) FR DE IT ES SE UK USA 11 LIFE EXPECTANCY AT 65 (MEN)

7 Life expectancy at 65 (women) FR DE IT ES SE UK USA 14 LIFE EXPECTANCY AT 65 (WOMEN)

8 SP 2002 SP 2003 SP 2004 SP 2005 SP 2006 SP 2007 SP 2008 incidence in the base year (ex.: SP 2002 SP 2008), base base base base base base base as % of the long run year year year year year year year increment projected in the last SP 58 5,8 85 8,5 58 5,8 79 7,9 58 5,8 79 7,9 58 5,8 79 7,9 59 5,9 83 8,3 59 5,9 83 8,3 42% 4,2% Belgium 6,2 8,2 6,6 8,7 6,9 9,3 7,3 9,5 7,1 10,8 SP n.a. (5) 24,3% Denmark 7,4 9,2 7,5 9,3 8,1 10,4 8,3 11,0 8,2 10,4 7,6 10,3 7,5 9,2 5,9% Finland 6,2 7,9 6,2 9,1 6,7 10,1 7,3 11,7 7,3 10,5 7,3 10,5 34,4% France 7,4 9,1 9,9 6,9 8,9 9,4 Germany 6,0 7,1 5,7 7,1 6,6 7,7 6,0 7,3 7,0 8,3 7,0 8,3 Greece 4,8 6,6 4,8 6,6 5,0 6,6 12,5% Ireland 6,6 9,1 6,6 10,2 5,9 8,5 5,9 8,5 0,0% Italy 5,5 7,5 6,0 7,6 6,3 8,1 6,3 7,8 6,5 8,1 6,7 8,6 6,7 8,6 63,2% Luxemb. 6,0 7,8 6,0 7,8 Netherl. 10,7 6,6 8,5 6,6 8,5 Portugal 5,3 6,1 6,3 8,1 6,3 8,0 6,8 7,8 7,2 8,1 100% Spain 6,6 9,1 6,6 9,1 Sweden 9,6 14,4 10,1 14,7 10,1 14,2 10,5 14,8 9,7 14,0 10,3 12,6 30,4% U. K. 7,2 11,0 7,1 10,8 7,9 11,0 8,4 11,7 9,6 11,9 9,6 11,9 104,3% HEALTH CARE EXP. IN SPs

9 TRENDS ECOFIN PROJECTIONS< OECD PROJECTIONS MICRO MACRO IMBALANCES CONCLUDING DISCUSSION

10 Awg reference scenario % Gdp acute expenditure FR 8,1 1,2 DE 7,4 1,8 Europop 2008 Per capita exp. per age sex grows at the same rate as per capita Gdp Per capita demand has an elasticity to per capita Gdp of a IT 5,9 1,1 1,1 in 2007, and then starts converging gcontinuously to ES 55 5,5 16 1,6 unity until 2060 SE 7,2 0,8 UK 7,5 1,9 UE 15 6,9 1,5 UE 27 6,7 1,5 Awg reference scenario % Gdp LTC expenditure FR 1,4 0,6 DE 0,9 1,4 IT 1,7 1,3 ES 0,5 0,9 SE 3,5 2,3 Every year, the age sex profile shifts by half the change in life expectancy (dynamic i profiling) ) Europop 2008 Per capita exp. per age sex grows at the same rate as Gdp per worker, except for cash provisions, for which the reference is per capita Gdp Demand elasticity is always equal to unity UK 08 0,8 05 0,5 Every year, disability rates decrease by half of the decrease in age specific mortality rates (dynamic profiling) UE 15 1,3 1,2 UE 27 1,2 1,1 The probability of receiving formal care is held constant at the 2007 value LT SUSTAINABILITY: ASSUMPTIONS

11 Italy in the Ageing greport 2009 Ageing Report 2009: technological scenario for acute expenditure Demand elasticity to per capita Gdp 0,7, 07 with a technological mark up of 2 p.p. [+2 p.p. : +4 p.p.] by 2060 "Technological" scenario % Gdp acute expenditure FR 14 1,4 68 6,8 DE 0,9 7,2 IT 1,7 5,3 ES 05 0,5 56 5,6 SE 3,5 5,4 UK 0,8 7,4 UE ,3 64 6,4 UE 27 1,2 6,3 Historically, so the rate aeof growth go of per capita expenditure has been higher than the rate of per capita Gdp by 1 2 pp p.p. THE IMPACT OF EXTRA DEMO DRIVERS (AGEING REPORT 2009)

12 TRENDS ECOFIN PROJECTIONS OECD PROJECTIONS< MICRO MACRO IMBALANCES CONCLUDING DISCUSSION

13 With respect to Ecofin: macroeconomic assumptions sufficiently aligned dynamic profiling as Ecofin but With demo and extra demo drivers % Acute acute and long term Gdp The rate of growth of per capita exp. is equal to the 2005 rate of per capita Gdp multiplied by 1,2 and with a 2005 further spread of 1,1 gradually converging gto zero by FR 8,1 7,1 Otherwise, when elasticity is unitary, the rate of growth DE 8,8 6,0 of per capita exp. has a permanent spread of 1 p.p. on IT 66 6,6 94 9,4 the rate of per capita Gdp ES 5,5 7,2 Long term care SE 8,6 4,2 The dimension of formal assistance is inversely UK 72 7,2 57 5,7 proportional to the activity rate in the age 50 64, that is UE 15 7,2 6,4 supposed to converge to 70% for all Countries (today, in UE 27 6,7 6,9 Italy is approximately 66%) Dependency ratios have two simultaneous dynamics: a decreasing one over long periods, and an increasing one year by year Per capita exp. grows at the same rate as Gdp per worker OECD PROJECTIONS

14 TRENDS ECOFIN PROJECTIONS OECD PROJECTIONS MICRO MACRO IMBALANCES< CONCLUDING DISCUSSION

15 Sustainability Report 2009: 2% is the structural primary balance in 2009; 3,9% is the constant structural primary balance necessary to reach a debt/gdp ratio equal to 60% by 2060; 3,4% is the constant structural primary balance necessary to satisfy the public budget constraint over an infinite horizon Awg reference scenario projections: to stabilize the incidence on Gdp of public exp. at the current level, public coverage should decrease from the current 75% to 50% by Oecd projections (or Ecofin technological scenario): to reach the goal of a debt/gdp ratio equal to 60% by 2060, we would need a path of primary balances continuously growing from 3,9% 9%to at least 10% 11% 11% FROM PROJECTIONS TO IMBALANCES 1

16 Today, any active person finances pension and health care exp. dedicated to any 65+ with resources amounting to 31% of per capita Gdp. By 2050, it will be 42,2% under the Awg reference scenario for pension and health care; and it will be 48,6% if the Oecd scenario for health care is considered. In Ue 15, these three percentages are respectively 25,2, 38,3 e 45% Today, any employed person finances pension and health care exp. dedicated to any 65+ with resources amounting to 52,6% of per capita Gdp. By 2050, it will be 62,3% under the Awg reference scenario for pension and health care; and it will be 71,5% if the Oecd scenario for health care is considered. In Ue 15, these three percentages are aerespectively e 36,2,, 51,5,5ee 60,4% A strong impact on public Paygo monopillar systems Both systems à la Bismarck and à la Beveridge are involved Increments of incidence also for countries like France, Germany, Sweden FROM PROJECTIONS TO IMBALANCES 2

17 Even under an intermediate scenario between Awg reference and Oecd, by 2050 the incidence of public health care exp. on Gpd will reach approximately the same level as public pension expenditure (in the long run stabilized at 14%) How to finance other welfare institutions/instruments? Composition of welfare expenditure, recovery, growth Redistributive functions need Paygo FROM PROJECTIONS TO IMBALANCES 3

18 Diversification of welfare expenditure (Herfindahl index) Eurostat (pub & priv) Ecofin (pub) BE 23,53% 28,53% DK 23,66% 28,15% DE 24,62% 32,87% IE 25,56% 28,61% EL 28,34% n. a. ES 27,16% 31,58% FR 25,18% 34,25% IT 34,34% 37,32% LU 19,48% 35,87% NL 24,97% 28,17% AT 26,16% 36,95% PT 28,45% 32,81% FI 22,32% 28,76% SE 24,94% 25,99% UK 28,91% 29,90% UE 15 25,84% 31,41% Whatis going to happen to this index in the long run? Italy is invited to: [ ] improve the quality of public finances by focusing on spending efficiency and composition, also by reallocating social expenditure so as to create room for a more comprehensive and uniform unemployment benefit system that ensures appropriate work incentive and effective activation policies, without compromising the fiscal consolidation process PF Emu 2009 FROM PROJECTIONS TO IMBALANCES 4

19 per capita public health care expenditure variation expected after per capita public health care standardization expenditure and scaling by quality efficient level (Euro) average (constant Euro 2000) % difference between current expenditure and effic target Campania ,9% Sicilia ,7% Puglia ,0% Lazio ,1% Trentino A. A ,1% Liguria ,1% 1% Abruzzo ,0% Molise ,4% Calabria ,1% Basilicata ,1% Valle dʹaosta ,8% Sardegna ,2% Toscana ,6% Veneto ,5% Emilia Romagna ,9% Marche ,5% Lombardia ,9% Piemonte ,5% Friuli V. G ,6% Umbria ,8% Regions involved in a formal plan, approved by the State, to consolidate health care expenditure and reabsorb past deficits generated by the health care system : 67 billions (4,3% of Gdp) FEDERALISM, EFFICIENCY, COORDINATION BETWEEN GOV. LAYERS ( SANIREGIO BY CERM)

20 Dependency ratios dependency ratio * d.r. corrected by employment and productivity dependency ratio * d.r. corrected by employment and productivity ** dependency ratio * d.r. corrected by employment and productivity** dependency ratio * d.r. corrected by employment and productivity ** North West 52,4 79,5 55,0 80,9 1,4 60,5 8,1 89,0 9,5 81,1 28,7 119,4 39,8 North East 52,4 80,9 54,7 83,0 2,1 58,9 6,5 89,4 8,5 79,7 27,3 120,9 40,0 Centre 52,8 89,0 54,5 87,0 2,0 60,4 7,6 96,4 7,4 83,6 30,8 133,4 44,4 South 49,8 138,8 50,3 110,2 28,6 60,0 10,2 131,4 7,4 93,1 43,3 204,0 65,1 * Istat central scenario. ** Current level of productivity. Partial convergence to Lisbon target. DEPENDENCY RATIOS

21 TRENDS ECOFIN PROJECTIONS OECD PROJECTIONS MICRO MACRO IMBALANCES CONCLUDING DISCUSSION<

22 Potential pressure vs. projections that already take into account interventions to stabilize the incidence on Gdp? Trade off between sustainability and coverage Diversification of welfare expenditure and of financing Coordination between different layers of government Efficiencyofhealth care systems CONCLUDING DISCUSSION

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