How are public finances affected by the COVID-19 crisis and ageing?

26.07.2022

The Federal Financial Administration's working paper discusses the impact of the COVID-19 crisis and population ageing on public healthcare expenditure and compulsory health insurance up to 2050. The projections provide an in-depth analysis of the November 2021 report on the long-term sustainability of public finances and highlight the need for economic policy action in the healthcare sector.

The working paper "Healthcare expenditure projections up to 2050: ageing and the COVID-19 crisis" shows that population ageing exerts steady and growing pressure on public budgets and compulsory health insurance up to 2050. In 1990, total healthcare expenditure in Switzerland amounted to 7.6% of gross domestic product (GDP); in 2019, it was already 11.3% of GDP. According to the reference scenario for these projections, healthcare expenditure will increase further by 2050, to 15% of GDP. In addition to the expenditure growth in compulsory health insurance, the greatest additional burden is incurred by the cantons.

Chart: Healthcare expenditure from 2010 to 2019 and in the reference scenario (in % of GDP)

In the medium to long term, healthcare expenditure is driven not only by demographic change, but also by non-demographic factors such as rising income, medical advances and Baumol's cost disease. The projections also suggest that long-term care will be affected by higher cost growth than the rest of the healthcare system. In the long-term care sector, population ageing in particular is a significant cost driver.

The COVID-19 pandemic underlined the importance of resilient healthcare systems and showed that unexpectedly rapid growth in healthcare expenditure can place a burden on public finances. However, the projections show that COVID-related healthcare expenditure has only a short-term impact on public budgets and compulsory health insurance, with relatively little effect in the longer term.

In addition, a policy scenario based on the Federal Council's proposal discusses the effects of cost targets. The policy scenario illustrates that cost targets can allow substantial savings to be achieved in compulsory health insurance and public budgets.

The healthcare expenditure projections are based on the report on the long-term sustainability of public finances in Switzerland which is updated roughly every four years, and were last published in 2017. They are not forecasts, but rather an extrapolation of long-term trends, and are thus characterised by considerable uncertainty. The expenditure projections are aimed at highlighting the need for economic policy action in the healthcare sector.

Working paper "Healthcare expenditure projections up to 2050: ageing and the COVID-19 crisis (PDF, 2 MB, 25.07.2022)"  

Image: Shutterstock

Last modification 26.07.2022

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