POPULATION AGING AND THE GROWTH OF HEALTH EXPENDITURES

To what extent can rising per capita health expenditures be attributed to the changing age composition of the population? While numerous projections have been made, all have been based on cross-sectional spending differences between individuals at a single point in time, rather than on national expenditures as the age structure of the population changes over time. Cross-sectional and time series analyses of 20 countries in the years 1960-1988 show population aging is associated with higher health expenditures if no other variables are allowed in the equation; this "effect, " however, is due to the secondary association of aging with rising per capita income and other omitted trend variables. Once these factors are controlled for, there is no longer any discernible association between age structure and health care costs. Age affects the allocation of spending, but not the total amount of funds available. The increasing burden of health expenditures is largely a policy and cost management problem rather than a demographic one.