Containing or Shifting? Decomposing Health Expenditures for the Dutch Ageing Population after a Major Reform

Ageing populations increase pressure on health expenditures, notably in long term care (LTC). Therefore, many countries face major challenges in keeping their healthcare system affordable. The Netherlands is known for its high expenditures on long term care (LTC) – currently nearly one third of total health expenditures. With the percentage of older population (65+) expected to increase from 18% in 2017 to 26% in 2040, a comprehensive policy reform has been recently implemented in order to substitute institutional care with home care and contain LTC expenditures.

Before the reform, LTC fell under a single law, covering both institutional care and professional home care consisting of nursing and assistive services. In 2015, the reform restructured LTC into three care domains: (i) professional home based nursing care covered by general health insurance (ii) institutional care covered by LTC insurance, and (iii) assistive home care provided by municipalities. Moreover, access to institutional care has been restricted by administrative measures while provision of home care and social care was encouraged. It is however still to be seen whether the policy effect actually went beyond shifting LTC-expenditures to other healthcare domains and what spillover effects across domains might have appeared. Therefore, the aim of this paper is to (1) describe the trends in total expenditure of the 65+ population and (2) decompose the change in these expenditures.

We provide insight in the evolution of the health expenditure and its decomposition across healthcare sectors for the complete 65+ population in the Netherlands (three million people) in the period 2012-2016, by using individual health and social insurance claims. The decomposition employs a model specifically tailored to the lifecycle of the 65+ population – characterized by the subsequently increasing demand for assistance, home and nursing care as people grow older. The model divides the population in subgroups according their care needs, every subgroup representing a care step. We have explained transitions from one care step to a higher care step, and we have explored differences in these transitions before and after the reform. Furthermore, we have explored how the changes in transitions impacted expenditures.

The total health expenditures for the 65+ population grew from 24 billion in 2012 to 26 billion in 2014. From 2015 and 2016 the total expenditures no longer increased. The percentage of the population in nursing homes declined over the period. Also, the expenditure composition changed.

Our study is the first study in the Netherlands that covers all healthcare domains at the micro level over a 5 year period, thus providing the most detailed integral picture of these expenditures for the entire 65+ population of the Netherlands. We were able to draw the tentative conclusion that the total health expenditures for the 65+ population have been contained and shifted, at least in the short-term.