The difference between life expectancy and healthy life expectancy might sound like something that is only of interest to healthcare professionals but it actually lies at the heart of much of our political debate. Questions about the sustainability of public finances, how much tax we will need to pay in the future, how far and how fast public service spending should be cut, intergenerational fairness and even how many immigrants the country needs all depend on the rates of ageing and healthy ageing.

Our long-term fiscal challenge is essentially a health spending challenge. Every year, the OBR produces a report on the UK’s long-term fiscal sustainability which says that upward pressure on public finances means that, even if the government’s public spending cuts are implemented, the country’s debt-to-GDP level will start to rise again in the middle of the next decade. Michael O’Connor put the projections from the most recent report on a single chart. The OBR’s Central projection for public debt (the black line on the chart) is based on a number of assumptions. If these turn out to be wrong, that would change the forecast. As this chart shows, higher or lower interest rates, different rates of migration and a change in pension policy could all increase or reduce the likely amount of debt over the next 50 years.

Of all the variables, though, nothing has as much impact as health productivity. The OBR’s central projection assumes that NHS productivity increases by 2.2 percent per year. Over the last 30 years or so, though, it hasn’t come anywhere near that. The OBR estimates health productivity has improved at 1.1 percent since 1979, a rate which, if it continues, will not be enough to counter the health service’s increased costs over the next 50 years. This would therefore push public debt up to around 190 percent of GDP (the pink line on the chart), close to the IMF’s fiscal danger zone.

Increased demand has made healthcare costs outstrip economic growth in most developed countries and most forecasts expect that to continue as populations get older. The OBR refers to the European Commission’s report on ageing which forecasts that the UK’s annual health spending will grow by only 1.5 percent of GDP over the next 50 years. (The OBR believes this is too optimistic.) The IMF, in its recent Fiscal Monitor report, forecast an extra 2.4 percent of GDP by 2030. The OBR’s central projection says another 1.7 percent by 2060 while its low productivity growth scenario has health costs rising by 7 percent of GDP over the next half century. Most forecasters agree that UK health spending will grow faster than its economy over the next few decades.

An ageing population is not the only reason for rising healthcare costs but the prevailing wisdom is that increased life expectancy will add ever more pressure to stretched health systems over the next couple of decades. As people live longer, they will spend longer needing more healthcare and will become in ever increasing fiscal burden on the shrinking proportion of the population of working age.

But this may not necessarily be so. A recent paper by the Campaign for the NHS Reinstatement Bill argues that the demographic time bomb is a myth.

The extent, speed, and effect of population ageing has been exaggerated by the government because the standard indicator—the old age dependency ratio — does not take account of the fact that people aged over 65 years are younger, fitter and healthier than in previous decades. In fact older people have falling mortality, less morbidity, and are more economically active than before. Some forms of disability are postponed to later years. Old people ain’t what they used to be. People in their 60s are a lot fitter than they were when the retirement age was set. If we redefine what we mean by working age then the picture doesn’t look nearly as bleak. Most acute medical care costs occur in the final months of life, with the age at which these occur having little effect. It is not age itself, ‘but the nearness of death’ or health status of

the individual in the ultimate period in the last few years or even months before death that matter most. Jeroen Spijker and John MacInnes, writing in the British Medical Journal in 2013, showed that if we change our definition of old age from age 65 to less than 15 years of life expectancy, our projected dependency ratios don’t look as bad. As life expectancy crisis above 80, people of 65 are no longer classed as old and so the proportion of the population considered to be dependent and beyond working age does not rise as quickly. But increasing the working age in line with increases in longevity assumes that, as well as living longer people will stay healthy for longer. The gap between life expectancy (LE) and healthy life expectancy (HLE) also determines how much care people will need at the end of their lives. Unless healthy life expectancy increases at a faster rate than life expectancy, the number of years for which people need care will increase. Figures released last month by the ONS suggest things are moving in the right direction. Life expectancy is rising for both men and women but healthy life expectancy is rising slightly more so the years of ill health each person can expect has fallen slightly. Source: ONS The findings of the Global Burden of Disease Study published in the Lancet yesterday were somewhat different. The good news is that the gap between life expectancy and healthy life expectancy isn’t as wide as that calculated by the ONS. The bad news is that it has been getting wider since the 1990s, as it has been in most countries in the world. People are living longer but living sicker for longer too. Source: The Lancet The ONS and Lancet figures are based on different methodologies and I hope that some of the medics and health economists who read this blog will explain the relative merits of each one. What we do know, though, is that life expectancy is increasing as the world becomes more affluent and all countries are faced with ageing populations. If the improvement in people’s health doesn’t keep pace with increasing life expectancy, then the rapidly changing age profile will present a serious fiscal challenge to all governments. But if we can stay healthier for longer too, the pressure on health spending need not be as severe. The human race is at the start of a great experiment. For most of our history, only a tiny proportion of people survived beyond their 60s. By the middle of this century, the over 60s will be more than 20 percent of the world’s population. We have no idea what the implications of this will be but we will need to find ways of dealing with such a momentous change. One of them will be to keep ourselves a lot healthier for a lot longer. Update The Economist has put some of the data from the Lancet report on a chart. It’s those orange bits that cause the problem.