The “red herring” after 20 years: ageing and health care expenditures

One of the most important controversies in the health economics discourse of the last twenty years concerns the question whether the imminent ageing of the population in most OECD countries will place an additional burden on the tax-payers who finance public health care systems. These systems are usually pay-as-you-go financed with taxes or contributions depending on labor income and pensions. Population ageing due to rising longevity and below-replacement fertility in coming decades will lower the population share of working-age persons and raise the share of pensioners. Since labor income exceeds pensions by far, this will weaken the tax base so that tax or contribution rates will rise notably.