The Cost of Population Aging. Forecasting Future Hospital Expenses in Germany

Hilke Brockmann, GSSS, Bremen University
Jutta Gampe, Max Planck Institute for Demographic Research

Forecasts are always wrong. Still, forecasts show future possibilities and give reason for policy decisions today. Population aging has become a hot political topic. The paper aims at gauging the effect of population aging on hospital expenses in Germany. Our probabilistic forecast model comprises a stochastic demographic component, that exploits historical mortality trends, a stochastic cost component based on life-course typical hospital costs, and a quality measure of medical progress, which builds on past advances in hospital treatment. Our scenarios yield 3 important results. First, there is an increase in overall hospital expenditures until the German baby boomers will die out in 2040 to 2050. Second, this increase is comparably moderate, because the average individual costs are likely to decline as the health of the elderly improves and as medical progress has an ambiguous influence on hospital expenditures. Finally, the cost increase varies significantly by gender and disease.