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Population Aging
Table 7.16 “Aging and Benefit Change” Scenario: Change in Public Sector Spending on Education, Health Care, and Pensions, 2005–50 (Percent of GDP) Fiscal imbalance Severe
Moderate
Mild
Country
Combined
Education
Health
Pensions
Cuba Costa Rica Argentina Brazil Peru Mexico Colombia Uruguay Nicaragua Chile Median Mean
17.8 12.6 9.4 6.5 4.2 4 3.4 1.9 4.2 0.7 4.2 6.5
–4.6 1.6 1.3 –0.7 0.8 –0.8 –1 3 –1.9 0 –0.4 –0.2
12.6 6.1 3.7 4.1 1.2 3.2 5.6 2 2.1 2.7 3.5 4.3
9.8 4.9 4.4 3.1 2.2 1.6 –1.2 –3.1 4 –2 2.7 2.4
Source: Authors’ compilation.
The biggest challenge turns out to be health care (tables 7.16 and 7.17). In large part, this is because many countries have already reformed their pension systems in ways that shift future costs away from government budgets. It is important to remember that these reforms do not make pension costs disappear; they merely make them disappear from the public accounts. How successful the new pension schemes are at providing for the growing numbers of elderly remains to be seen. The projected increases in pension expenditures in Latin America (mean of 2.4 percentage points) are very close to those projected for the EU154 countries (mean of 2.3 percentage points) (DG ECFIN 2006). However, in the case of the EU15, only one country (Austria) shows a projected decline in pension costs, while in Latin America there are three such cases (Chile, Colombia, and Uruguay). With health care, government policy is likely to make matters more rather than less expensive for governments. If the trends we observe continue, increases in GDP/worker are going to come with significant growth in health care expenditures on the elderly. The combination of rapidly increasing numbers of elderly with expanding health care benefits at higher ages produces large growth in government budgets. The impact of population aging on health care in Latin America is projected to be larger than that observed in the European Union. On average, we forecast a 4.3 percentage point increase in public health