Dynamic determinants of long term care expenditures beyond population aging in OECD countries

Population ageing is regarded as one of the primary determinants of long-term care (LTC) spending in OECD nations. In fact, the associations between LTC expenditures and ageing may not be the same at different stages of ageing and with various institutional care structures. This research considers whether different phases of ageing are linked to different levels of LTC expenditure, while controlling for health system capacity and public financial frameworks. The study uses an unbalanced panel dataset of 36 OECD countries covering 2000–2024 (808 country-year observations). Real per capita LTC expenditures adjusted for purchasing power parity were used as the dependent variable. The Healthy Ageing Index, Health System Capacity Index, and Public Financing Structure Index variables were constructed using principal component analysis. The empirical framework incorporates two-way fixed effects, Driscoll–Kraay, Common Correlated Effects, and System GMM estimations. The findings of the analysis demonstrate that LTC spending is not uniform across all stages of ageing. For the population aged 65–79 the coefficient is negative and statistically significant; however the coefficient of the population aged 80 and older is positive and significant. Dynamic panel results show that there is a strong persistence of LTC expenditures. Similarly, stronger health system capabilities are correlated with more money spent on LTC. LTC in the OECD countries varies not just based on the ageing itself but also based on advanced age dependence, institutional capacity to provide care, and public financing patterns. The results emphasize the necessity of differentiating between stages of ageing at an age-distinction point in LTC policy analysis.