Population Aging: Is Latin America Ready?

DIREC TIONS IN DE VELOPMENT

Human Development

Population Aging Is Latin America Ready? Daniel Cotlear, Editor

Population Aging

Population Aging Is Latin America Ready? Edited by Daniel Cotlear

© 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development/The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN-13: 978-0-8213-8487-9 eISBN: 978-0-8213-8469-5 DOI: 10.1596/978-0-8213-8487-9 Library of Congress Cataloging-in-Publication Data Population aging: Is Latin America Ready? / Daniel Cotlear, editor. p. cm. — (Directions in development) Includes bibliographical references and index. ISBN 978-0-8213-8487-9 (alk. paper) — ISBN 978-0-8213-8469-5 (ebook) 1. Population aging—Social aspects—Latin America—Congresses. 2. Population aging—Social aspects—Caribbean Area—Congresses. 3. Population aging—Economic aspects—Latin America— Congresses. 4. Population aging—Economic aspects—Caribbean Area—Congresses. 5. Population aging—Health aspects—Latin America—Congresses. 6. Population aging—Health aspects— Caribbean Area—Congresses. 7. Older people—Latin America—Economic conditions. 8. Older people—Caribbean Area—Economic conditions. I. Cotlear, Daniel. HQ1064.L29P67 2010 305.26098—dc22 2010031650 Cover design by Quantum Think Cover photo by Gusjer@Flickr.

Contents

Preface Acknowledgments About the Authors Abbreviations Chapter 1

xvii xxi xxiii xxvii

Population Aging: Is Latin America Ready? Daniel Cotlear

1

Introduction Support of the Elderly and Poverty in the Life Cycle The Impact of Population Aging on Health Status and Health Care Demand The Impact of Population Aging on Public Expenditures Conclusions and Implications Notes References

1 16 22 27 31 36 38

v

vi

Contents

Chapter 2

Demographic Trends in Latin America and the Caribbean Paulo M. Saad Introduction Trends in Mortality, Fertility, and Migration Changes in Population Size and Age Structure Demographic Transition, Dependency Ratios, and Demographic Dividend Taking Advantage of the Demographic Dividend to Face the Challenges of Population Aging Annex 2.1 Population Projection, Dependency Ratio, and Demographic Dividend under Different Demographic Assumptions Notes References

Chapter 3

Poverty, the Aging, and the Life Cycle in Latin America Daniel Cotlear and Leopoldo Tornarolli Introduction Demographic and Residence Indicators in Latin America Poverty at Different Ages: Methodological Notes Poverty at Different Ages: Empirical Evidence Drivers of Old-age Poverty and the Role of Pensions and Other Transfers The Labor Market and Old-age Poverty Inequality among the Aging Living Arrangements of the Aging and Familial Transfers Conclusions Notes References

Chapter 4

43

43 44 51 55 64

65 75 75 79

79 80 83 87 101 113 118 119 130 131 132

How Age Influences the Demand for Health Care in Latin America André C. Medici

135

Introduction Objectives, Data, and Concepts

135 136

Contents

Health Needs in LAC Trends in Health Care Utilization by Age in LAC Health Expenditures and Health Costs by Age Conclusions Notes References Chapter 5

The Economics of Happiness and Health Policy: How Health Norms Vary across Cohorts in Latin America Carol Graham The Economics of Happiness Norms of Health: The Example of Obesity Health Satisfaction in Latin America Valuing Different Health Conditions in Latin America Based on the EQ-5D Lessons for Policy Notes References

Chapter 6

Who Benefits from Public Transfers? Incidence across Income Groups and across Generations in Brazil and Chile Cassio M. Turra, Mauricio Holz, and Daniel Cotlear Introduction Methods Benefit Incidence by Sector The Incidence of Aggregate Public Expenditures Larger Support for One Generation: Is there a Global Model? Conclusions Notes References

vii

138 161 172 180 183 185

191

193 198 200 201 205 206 208

211

211 213 215 220 225 228 230 231

viii

Contents

Chapter 7

The Fiscal Impact of Demographic Change in Ten Latin American Countries: Projecting Public Expenditures in Education, Health, and Pensions Tim Miller, Carl Mason, and Mauricio Holz Introduction The Influence of Demography and Policy on Current Levels of Public Spending The Influence of Demographic and Policy Change on Future Public Spending on Education, Pensions, and Health Care Fiscal Impact of Population Aging in Latin America Notes References

Index

233

233 235

247 264 270 270 273

Figures 1.1 1.2 1.3 1.4 1.5 1.6 1.7 2.1 2.2 2.3 2.4 2.5

A Century of Changes in the LAC Population Structure Life Expectancy at Birth and Total Fertility Rate in LAC, 2005–10 The Economic Life Cycle in LAC Population Over 60 Receiving a Pension, Percent Poverty among Children and the Aging Sources of Income for the Aging Population, Percent Probability of Dying between the Ages of 5 to 59, (2001) Life Expectancy at Birth in Selected LAC Countries, 1950–2050 Total Fertility Rate in Selected LAC Countries, 1950–2050 Natural and Total Growth Rates in LAC, by Country, 2005–10 Population Growth Rates by Major Age Group in LAC, 1950–2050 Population by Age Group in LAC, 1950–2050

6 7 12 14 17 20 23 46 48 50 52 53

Contents

2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14

Population Distribution by Major Age Group in LAC, 1950–2045 Dependency Ratio in Selected Countries, 1950–2050 Child Dependency Ratio in Selected LAC Countries, 1950–2050 Old Age Dependency Ratio in Selected LAC Countries, 1950–2050 Future Trends in Dependency Ratio in Selected LAC Countries, 2008–50 Period and Stages of Demographic Dividend in Latin American Countries Population by Major Age Groups under Different Projection Variants in LAC, 1950–2050 Population Distribution by Major Age Groups under Different Projection Variants in LAC, 1950–2050 Total Child and Old-age Dependency Ratios under Different Projection Variants in LAC, 2010–50 Future Trends in Dependency Ratio in Selected LAC Countries, 2008–2070 Population Structure by Age Population Age 60+ in Urban and Rural Areas, Percent Male/Female Ratio by Age Average Family Size by Age National and Old-age Poverty Headcount Ratios National and Young People’s Poverty Headcount Ratios Poverty Headcount Ratio by Age Simulating the Impact of Demography on the Income of the Poor Poverty Ratios for the 60+ and 80+ Populations People Over Age 60 Who Receive Income from Pensions, Percent Pension Coverage by Age and Gender, Percent People over Age 60 Who Receive Private Transfers, Percent Simulated Impact of Pensions and Private Transfers on Old-age Poverty (percentage point increase of poverty) Hours Worked by the Aging as a Percentage of the Hours Worked by Those Aged 25–59

ix

54 59 60 60 61 63 67 68 69 71 82 83 84 85 89 89 90 100 101 106 110 111 113 116

x

Contents

3.15 3.16 3.17 3.18 3.19 3.20 3.21 3.22 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9

4.10

4.11

Hourly Wages of the Aging as a Percentage of the Hourly Wages of Those Aged 25–59 Labor Income of the Aging as a Percentage of Income of Those Aged 25–59 Gini Coefficients of Income of the Aging (with and without pensions and transfers) Percentage of Aging Living Alone or with a Spouse Percentage of Aging Living Alone and Availability of Children, National Level Percentage of People Living in Single-generation Households Males Living Alone or with a Spouse and Females Living Alone or with a Spouse, Percent Poverty among the Aging by Living Arrangements, Percent Economic Implications of Aging on Health Demand Mortality as a Share of DALYs in LAC by Age and Gender, 2004 YLL per 1,000 Inhabitants in LAC by Age and Gender, 2004 YLD per 1,000 Inhabitants in LAC by Age and Gender, 2004 DALY per 1,000 Inhabitants in LAC by Age and Gender, 2004 DALY Losses per 1,000 Inhabitants by World Bank Regions, 2004 Distribution of DALY Losses by World Bank Regions according to Groups of Causes, 2004 Incidence (per 100 Inhabitants) of Risk Factors and Chronic Diseases in Brazil by Age Group, 1998 Health Status of Population Aged 60 and Older in Seven LAC Cities according to the SABE Survey, 1999–2000 Prevalence of Selected Diseases and Chronic Conditions in the Population Aged 60 and Older in Seven LAC Cities according to the SABE Survey, 1999–2000 Prevalence Rates of Disease and Disability in the Population Aged 60 and Older by Age Groups in Seven LAC Cities according to the SABE Survey, 1999–2000

116 117 120 121 122 123 125 126 137 139 140 142 143 144 145 146

147

148

153

Contents

4.12 4.13

4.14

4.15 4.16 4.17

4.18

4.19

4.20

4.21

4.22 4.23 4.24 4.25 4.26

Selected Data on the Studies of Burden of Diseases in LAC Countries The Individual Weight of the Burden of Diseases by Age: DALYs Per Capita in the LAC Region, 2004–30 Chronic Disease Prevalence in Santiago, Chile, Poorest Quintile to Richest Quintile, Ratio, 1999–2001 DALY Losses per 1,000 Inhabitants in Santiago, Chile, by Gender and Income Quintile, 1999–2001 How Health Needs Convert to Health Utilization Population with Perceived Health Needs in LAC as a Percentage of Total Population by Age Clusters, Gender, and Income Quintiles, 1997–99 Persons Who Declared Health Problems as a Percentage of Total Population, by Age Clusters, Gender, and Income Quintiles, Average of 12 LAC Countries, 1997–99 Persons Attended by Health Services as a Percentage of the Population Who Declared Health Problems by Age Clusters, Gender, and Income Quintiles, Average of 12 LAC Countries, 1997–99 Utilization Rates of Medical Visits as a Percentage of the Population for SUS Beneficiaries without Private Health Plans and Beneficiaries with Private Health Plans by Gender and Age, Brazil, 1998 Hospitalization Rates as a Percentage of the Population for SUS Beneficiaries without Private Health Plans and Beneficiaries with Private Health Plans by Gender and Age, Brazil, 1998 Trends in Health Care Spending in OECD and LAC Countries Health Care Benefits Age Profile in OECD Countries, 2000–05 Health Expenditures Age Profile in 6 OECD Countries, 2005 Health Care Expenditures per Capita by Age as a Share of GDP per Worker in Selected LAC Countries, 2005 Hospital Health Costs in Brazil and Uruguay by Age and Gender

xi

156

158

159 160 161

164

165

167

169

170 173 175 176 177 178

xii

4.27

4.28

5.1 5.2 5.3 5.4 5.5 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 6.9 6.10 6.11 7.1

7.2

Contents

Inpatient Rates and Correspondent Costs for Men in Two Brazilian Metropolitan Regions (Belem and Curitiba), Brazil, 2005 Hospital Costs Per Capita according to Life Status (Death or Survival) by Age and Gender, Brazil Minas Gerais State, 2005 Average Country Health Satisfaction Scores Health Satisfaction in Latin America by Cohorts Happiness and Health Satisfaction by Age in Latin America Norms and Obesity in the United States Income Equivalences of Health Conditions in the EQ-5D Education: Incidence of Public Expenditures in Brazil and Chile Pensions: Incidence of Public Expenditures in Brazil and Chile Health Care: Incidence of Public Expenditures in Brazil and Chile Bolsa Familia: Incidence of Public Expenditures in Brazil Distribution of Total Public Expenditures by Income and Age Groups, Brazil (2006) and Chile (2000) Distribution of Large Age Groups by Income Quintiles, Brazil and Chile, 2003 Elderly: Public Transfers as a Percentage of Total Consumption Children: Public Transfers as a Percentage of Total Consumption Children: Education as a Percentage of Total Consumption Public Funding of Education as a Percentage of Total Cost Elderly: Private Transfers as a Percentage of Total Consumption Percent of GDP Spent on Public Education, Disaggregated by Education Dependency Ratio and Benefit Generosity Ratio, 2005 Estimates and Projections of Education Dependency Ratio in Nicaragua, Costa Rica, and Cuba, 1950–2050

180

181 192 195 197 199 204 216 218 220 222 223 224 226 227 228 228 229

239

240

Contents

7.3

7.4 7.5

7.6 7.7 7.8 7.9

Percent of GDP Spent on Public Pensions, Disaggregated by Pension Dependency Ratio and Benefit Generosity Ratio, 2005 Estimates and Projections of Pension Dependency Ratios in Costa Rica, Cuba, and Nicaragua, 1950–2050 Percent of GDP Spent on Public Health, Disaggregated by Near-death Dependency Ratio and Benefit Generosity Ratio, 2005 Estimates and Projections of Health Dependency Ratio in Costa Rica, Cuba, and Nicaragua, 1950–2050 Initial Average Expenditures on Health Care by Age as Proportion of GDP/Worker: Estimated and Observed Health Benefit Generosity Ratio in High-income and Middle-income NTA Countries Projections of Public Health Care Spending by Age in Mexico

xiii

241 243

244 246 249 260 262

Tables 1.1 2.1 2.2 2.3 2.4 2.5 2.6 2A.2 2A.3 3.1 3.2 3.3 3.4 3.5

Aspects of the Demographic Window of Opportunity Life Expectancy at Birth by Gender and Infant Mortality Rate in LAC, 1950–2025 Total Fertility Rate and Annual Births in LAC, 1950–2050 Age-specific and Total Fertility Rate, Percentage Reduction, and Relative Distribution in LAC, 1950–2015 Population by Major Age Group in LAC, 1950, 2005, and 2050 Population by Major Age Groups under Different Projection Variants in LAC, 1950–2050 Total, Child, and Old-age Dependency Ratios under Different Projection Variants in LAC, 1950–2050 Countries According to the Stage of Demographic Transition in LAC Aspects of Dependency Ratio Trends in LAC Description of Household Surveys Poverty: Headcount Ratio by Age and Region Relative Poverty Ratio by Age and Region Relative Poverty Ratio of the Aging with the Economies of Scale (60+/60