Ageing and Health Care Costs STEPHANE JACOBZONE HOWARD OXLEY T otal health care and long-term care for the elderly represent around nine per cent of GDP averaged over some twenty OECD countries and around three-quarters of this is financed through the public sector. The process of ageing in OECD countries will begin to accelerate in virtually all OECD countries starting in about ten years time as the baby-boom generation begins to enter retirement. With forty to fifty per cent of health care spending being currently directed towards the elderly and with per-capita health care costs for those over 65 being three to five times higher than for those under 65 , upward pressure on health and long-term care costs is likely to ensue. The extent of this increase in spending will, however, depend on a range of factors in addition to age­ing. Technology and its diffusion appear to be important elements. At the same time the progressive declines in fertility rates experienced since the late 1960 s will depress the growth of labor supply. The consequent slower growth in GDP will make these additional costs more difficult to finance. The Relative Importance of Medical Technology, Incentives and Ageing For the purposes here, total care costs can be broken down into those associated with health care and those related to long-term care for the frail elderly. The first of these includes pharmaceuticals, ambulatory care and intensive hospital care and represented just over eight per cent of GDP in the late 1990 s averaged over some 24 OECD countries with around six per cent of this financed by the public sector(Table 1 , col­umns 1 and 2 ). The second item includes a wide range of services, from home help for older individuals still living on their own to long-term in­stitutional care for people who are completely dependent. While this in­cludes only publicly financed long-term care and is often poorly mea­IPG 1/2002 Ageing and Health Care Costs 137