Report: Population ageing is not the main reason for rising healthcare costs

Estonia’s healthcare costs have tripled in the last 15 years and doubled in ten years. Calculations by the Foresight Centre show that the increase in the cost of outpatient services and the salary increases of healthcare professionals are the main reasons for this.

“The labour-intensive healthcare sector’s expenditure on salaries increases with the general level of wages in our economy, because the healthcare sector must keep wages in line with the general level of our economy even if its labour productivity is less than that of the industrial or technology sector,” said Kaupo Koppel, an expert at the Foresight Centre. “This in turn means that the share of healthcare costs in GDP will likely continue to grow.”

The Foresight Centre’s calculations indicate that the ageing population contributes to only a small part of the growth in healthcare costs over the last 15 years. For example, compared to 2010, the impact of demographic factors explains only 4% of the increase in healthcare costs.

However, the growing cost of services and the rising salaries of healthcare professionals have accounted for around 51–55% of the increase in healthcare expenditure in Estonia, primarily concerning outpatient services. Increase in labour costs attribute to more than half (57–60%) of the increase in the expenditure of healthcare service providers and as much as 70–80% in case of family physicians, emergency care and nursing care. The purchase of medical goods, including medication, is another significant cause for the rising cost.

About 40% of the growth in healthcare costs is related to more frequent or intensive use of services like laboratory tests. In the last ten years alone, the cost of tests have grown 2.5 times, half of which has been due to the rising number of patients and the increasing number of tests per person.

However, the share of expenditure that is related to the organisation and distribution of funds in the Estonian healthcare sector has decreased over the years. In 20 years, the share of administrative costs in healthcare has fallen almost three times.

In its short report, the Foresight Centre highlights studies from European countries that found that healthcare costs escalate sharply right before a person’s death in hospital. The treatment of people in their final year of life accounts for approximately 10% of the country’s total healthcare expenses, and a large part of this occurs in the last month of a person’s life. “Today, intensive hospital care attributes to 80% of end-of-life costs and only a marginal part is spent on palliative care, or supportive care aimed at the patient’s quality of life,” said Koppel. “Its role is still underutilised in healthcare today.”

The short report ‘Reasons for the Rapid Growth in Healthcare Costs in Estonia’ (in Estonian) has been prepared within the framework of the Foresight Centre’s research stream ‘Healthcare Sustainability’. The research stream aims to find future opportunities for analysing alternative options to diversify healthcare financing and their impact on the availability of healthcare services in Estonia until 2050.