EUROPEAN PAPERS ON THE NEW WELFARE

Health and Long-Term Living: Trends and Best Practices in Europe

4. Long-Term Living and the Financial Sustainability of Welfare Systems in Europe

By 2050, in the EU 15 there will be 88 million people aged 60-79, compared to 69 million in 2005 (Barea M. and Cesana G., 2005). Moreover, there will be 38 million compared to 16 million people over 80 in 2005. The sharpest increase between 2020 and 2030 will occur among the 60-69 and 70-79 age groups. The former will drop between 2030 and 2050, whereas the latter will eventually flatten out; the number of people over 80 will increase.
The demographic trends in the new Member States are either the same or more pronounced since, with the exception of Malta and Cyprus, the fertility rates in these countries are below the European average. While life expectancy at birth is lower than in Western Europe, in all the new Member States population ageing and dependency rate are increasing.
The lengthening of life within European countries is of course an important achievement probably due to the improvement of social conditions and health care services. However, since some degenerative disorders — such as Parkinson’s or Alzheimer’s diseases — are more prevalent in over 65 year old people and, in any case, the cost for health and social care is much higher in the last years of life, there is a great concern regarding the financial sustainability of European welfare systems due to the continued increase in ageing population. In a study of the Economic Policy Committee of November 2001 on the projected size of EU 15 population in working age, really employed and elderly, it appears that in 2040 we will have 1 elderly for every 1.5 employed people, thus contributing to the social fund. Moreover, the need for long-term care begins to grow as one approaches the 65th year of age and increases dramatically thereafter (Bosa et al. 2005). It has been estimated that the impact of demographic variation on GDP% for funding long term care in the EU 15 countries in 2050 will require almost double the 2000 expenditure (Economic Policy Committee, 2001).
However, many of these scenarios have been built on the bases of the lengthening of life expectancy, but assuming a steady value of appearance of disability. Should the disability-free life expectancy be higher than the increase of life expectancy, the future perspective would be certainly better. Waiting for more definitive data on disability-free life expectancy in the European countries, it seems useful to report the initiatives undertaken by the EU to meet the challenge of the impact that the ageing population has on the financial sustainability of Welfare systems in Europe.

5. The ‘Open Method of Coordination’ and the Government Strategies for Reforming Social Security Systems

During the Lisbon summit of March 2000, it was decided that the “open method of coordination” should be applied to Welfare. The features of this method can be summarised in the following actions (Commission des Communautés Européennes, 2003): a) to define Union’s guidelines and draw up a road map for the realisation of short, medium and long-term objectives; b) to single out qualitative and quantitative indicators as well as assessment criteria that are adequate to the needs of Member States and facilitate the comparison of best practices; c) to translate the European guidelines into national and regional policies; d) to periodically verify said policies and draw conclusions which may be of use to all parties involved.
With the ‘open method of coordination’ the EU is trying to promote a concerted strategy with the national authorities to modernise the respective Member States’ welfare systems.
The welfare-modernisation strategy is based on four major objectives: a) to amend taxes and social services in order to make work financially more convenient; b) to guarantee certain and enjoyable pensions; c) to promote social integration; d) to provide a high and long-lasting level of response to health needs.
The EU strategy points out clearly that it is not possible to face the problem of the future sustainability of welfare systems in a sectorial perspective, and it is an important incentive for Governments to define priorities according to the most urgent problems of each country. As a consequence, Government strategies for reforming social security encompass a wide range of possible measures, which individual countries can pick and choose from to best suit their own national and local circumstances.
The most significant of these can be summarised as follows:
a) improving management of public services, with a greater use of information technology to increase productivity and a wider use of benchmarking to identify inefficiencies, adopt best practices and increase competitiveness;
b) a change in the way service providers are funded, with incentives for achieving efficiency and focusing on results;
c) the use of market mechanisms in relation to the procurement of public services, i.e. greater use of contracting, competitive tendering and public-private partnerships;
d) to reform fiscal relations at various levels of government, in favour of processes of decentralisation:
e) use of co-payments by service users;
f) pension reforms to increase the age of retirement;
g) health care and long term care reforms to promote a more efficient organisation of less expensive services, i.e. primary care, home care, informal care.

6. Conclusions

It is difficult to evaluate if the initiatives undertaken at European level and the incentives that the Union gives to the national Governments will be adequate to overtake successfully the problems derived from demographic changes in Europe. However, the EU has the merit of having led some important initiatives. Firstly, the EU has seriously analyzed the phenomenon of the lengthening of life expectancy studying in depth all its relevant aspects: from the need to intervene in order to overtake the inequalities still present in the Member States, to the elaboration of scenarios on the impact that this change will have on the financial sustainability of the European welfare systems.
The EU has also focused on these themes in advance and has undertaken many initiatives to raise the awareness of the Member States, in particular of those who tended to underrate the dimension of the problems or to postpone the decision to face the problems because of their unpopularity.
Then, the EU launched a common policy and proposed a method to face the challenge.
The common policy was launched in the ‘Lisbon Strategy’: the development of the European society in the period 2000-2010 was based on the increase in European competitiveness derived from its growth as a knowledge-based economy. This increased competitiveness cannot be achieved to the detriment of the level of social protection in Europe, which has to be guaranteed and, if possible, improved.
The method involves on the one hand the joint action that the Union and the single Member States can undertake to improve the different national welfare systems, on the other hand the awareness that no success can be achieved by undertaking limited and scarcely effective initiatives.

References

Barea, M. and Cesana, G. (2005): “Le riforme delle pensioni di vecchiaia”, Il Welfare in Europa: i principali fattori di una crisi, Società Editrice Fiorentina, M. Barea, A. Carenzi, G. Cesana, eds. 51-80.

Bosa, I., Cavazza, M., Carenzi, A. (2005): “L’invecchiamento della popolazione e il crescente bisogno di cure a lungo termine”, Il Welfare in Europa: i principali fattori di una crisi, Società Editrice Fiorentina, M. Barea, A. Carenzi, G. Cesana, eds. 111-140.

Commission des Communautés Européennes (2003): “Communication sur le renforcement de la dimension sociale de la stratégie de Lisbonne: Rationalisation de la coordination ouverte dans le domaine de la protection sociale”, COM, 261 fin./2, Bruxelles.

Delors, J., (1991): “Subsidiarité: défi du changement”, Actes du Colloque Jacques Delors, Institut Européen d’Administration Publique, 7-18, Maastricht.

Economic Policy Committee (2001): “Budgetary Challenges Posed by Ageing Populations: The Impact on Public Spending on Pensions, Health and Long-term Care For the Elderly and Possible Indicators of the Long-term Sustainability of Public Finances”, EPC/ECFIN/655/01-EN final, European Commission, Bruxelles.

Newey, C., Nolte, E., McKee, M. and Mossialos, E. (2004): “Avoidable Mortality in the Enlarged European Union”, ISS Statistics, 2: 7-44.

Oeppen, J. and Vaupel, J.W. (2002): “Broken Limits to Life Expectancy”, Science, 296: 1029-31.

Robine, J.M., Saito, Y. and Jagger, C. (2003): “The Emergence of Extremely Old People: The Case of Japan”, Experimental Gerontology, 38: 735-9.

Rutstein, D.D., Berenberg, W., Chalmers, T.C., Child, C.G., Fishman, A.P. and Perrin E.B. (1976): “Measuring the Quality of Medical Care”, New England Journal Medicine, 294: 582-8.

Thomson, S., Mossialos, E., McKee, M., Nolte, E., Allin, S. (2004): “Health and Health Systems in the New Member States”, ISS Statistics, 1: 9-62.

World Health Organization, Regional Office for Europe (1977): “Health in Europe, 1977”, WHO Regional Publications, European Series, 83.

World Health Organization (2004): Health for All Database.


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